ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2016

OR

☐

TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______ to ________

Commission file number: 000-53012

FIRST CHOICE HEALTHCARE SOLUTIONS, INC.

(Exact name of registrant as specified in its
charter)

Delaware

90-0687379

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

709 S. Harbor City Blvd., Melbourne, FL

32901

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including
area code: (321) 725-0090

Securities registered pursuant to Section 12(b)
of the Act:

Title of each class

Name of each exchange on which registered

N/A

N/A

Securities registered pursuant to Section 12(g)
of the Act:
Common Stock, par value $0.001 per share

Indicate by check mark if the registrant is a well-known seasoned
issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or 15(d) of the Act. Yes ☐ No ☒

Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically
and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405
of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark if disclosure of delinquent
filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained,
to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III
of this Form 10-K or any amendment to this Form 10-K. ☐

Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions
of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2
of the Exchange Act.

Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

The aggregate market value of the voting and
non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold as
of the last business day of the registrant’s most recently completed second fiscal quarter was $19,222,696.

As of
March 30, 2017, there were 26,803,994 shares of Common Stock, par value $0.001 per share, issued and
outstanding.

First
Choice Healthcare Solutions, Inc. (the “Company”) is filing this Amendment No. 1 on Form 10-K/A because the original
10-K file (the “Original Filing”) was an internal draft inadvertently filed by the Company’s filing agent.
The purpose of this Amendment No. 1 is to supersede the Original Filing in its entirety.

PART I

This report may contain
forward-looking statements within the meaning of Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as
amended, or the Private Securities Litigation Reform Act of 1995. Investors are cautioned that such forward-looking state to all
comments are based on our management’s beliefs and assumptions and on information currently available to our management and
involve risks and uncertainties. Forward-looking statements include statements regarding our plans, strategies, objectives, expectations
and intentions, which are subject to change at any time at our discretion. Forward-looking statements include our assessment, from
time to time of our competitive position, the industry environment, potential growth opportunities and the effects of regulation.
Forward-looking statements include all statements that are not historical facts and can be identified by terms such as “anticipates,”
“believes,” “could,” “estimates,” “expects,” “hopes,” “intends,”
“may,” “plans,” “potential,” “predicts,” “projects,” “should,”
“will,” “would” or similar expressions.

Forward-looking statements
involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements
to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.
We discuss many of these risks in greater detail in “Risk Factors.” Given these uncertainties, you should not place
undue reliance on these forward-looking statements. Also, forward-looking statements represent our management’s beliefs and
assumptions only as of the date of this report. You should read this report and the documents that we reference in this report
and have filed as exhibits to the report completely and with the understanding that our actual future results may be materially
different from what we expect. Except as required by law, we assume no obligation to update these forward-looking statements publicly,
or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even
if new information becomes available in the future.

ITEM 1.

BUSINESS

Overview

First Choice
Healthcare Solutions, Inc. (“FCHS,” “the Company,” “we,” “our” or
“us”) is actively engaged in implementing a defined growth strategy aimed at building a network of localized,
integrated healthcare services platforms comprised of non-physician-owned medical centers of excellence, which concentrate on
treating patients in the following specialties: Orthopaedics, Spine Surgery, Neurology, Interventional Pain Medicine and
related diagnostic and ancillary services in key high growth markets throughout the Southeastern U.S.

Successful
implementation of our business plan, thus far, has allowed us to confirm that by integrating the synergistic mix of
Orthopaedic, Spine Surgery, Neurology and Interventional Pain specialties with related diagnostic and ancillary services and
state-of-the-art equipment and technologies across legacy brick-and-mortar boundaries, we are able to effectively:

Managing over 100,000 patient
visits each year, our flagship system (“Melbourne System”) serves Florida’s high growth Space Coast region and
is comprised of the following well established Medical Centers of Excellence: First Choice Medical Group (“FCMG”),
The B.A.C.K. Center (“TBC”) and Crane Creek Surgery Center (“CCSC”).

Operating Subsidiaries

We
have operated as First Choice Healthcare Solutions, Inc., a Delaware corporation, since February 13, 2012. Our corporate address
is 709 S. Harbor City Blvd., Suite 530, Melbourne, Florida, 32901 and our phone number is 321-725-0090. Our corporate website
address is www.myfchs.com. Information contained in our website is not incorporated by reference herein. In 2016, we operated
our business through seven wholly owned subsidiaries.

●

FCID Medical, Inc. (“FCID Medical”) is the subsidiary under which we wholly own and operate First Choice Medical Group of Brevard, LLC, our original Medical Center of Excellence located in Melbourne, Florida. First Choice Medical Group specializes in the delivery of Orthopaedics, Sports Medicine, Neurology and Interventional Pain Medicine, as well as diagnostic and ancillary services. The web site is www.myfcmg.com.

●

TBC Holdings of Melbourne, Inc. (“TBC Holdings”)
is our wholly owned subsidiary that operates and controls Brevard Orthopaedic Spine & Pain Clinic, Inc., d/b/a The B.A.C.K.
Center (“TBC”). Pursuant to an Operation and Control Agreement with The B.A.C.K. Center, TBC Holdings exercises effective
control over the business of the practice to treat it as a Variable Interest Entity in accordance with Financial Accounting Standards
Board and Accounting Standards Codification, effective May 1, 2015. As a result, we include the financial results of TBC in our
consolidated financial statements in accordance with generally accepted accounting principles. TBC specializes in Orthopaedic
Spine Surgery and Interventional Pain Management, and its website is www.thebackcenter.net.

In addition, TBC subleases 29,629 square feet of commercial office space to affiliated and non-affiliated
tenants, including 18,828 square feet to Crane Creek Surgery Center (“CCSC”), located at 2222 South Harbor
City Boulevard, Melbourne, Florida 32901, which is also TBC’s main medical practice location.

●

CCSC Holdings, Inc. (“CCSC Holdings”) is our wholly owned subsidiary which acquired
a 40% interest in CCSC. The other owners are CCSC TBC Group, LLC, owned
by Richard Hynes, M.D., FASC and Devin Datta, M.D.; and Blue Chip Crane Creek Investments, LLC, owned by NueHealth,
LLC, which develops and manages world class ambulatory surgery centers and specialty hospitals across the United States. Dr. Hynes
and Dr. Datta are both affiliated with The B.A.C.K. Center. Pursuant to the CCSC Restated and Amended Operating Agreement, CCSC
Holdings now exercises sufficient control over the business of CCSC to treat it as a Variable Interest Entity in
accordance with Financial Accounting Standards Board and Accounting Standards Codification,
effective October 1, 2015. As a result, we include the financial results of CCSC in our consolidated financial statements in accordance
with generally accepted accounting principles. CCSC is an AAAHC accredited facility dedicated to delivering excellent ambulatory
care in a convenient, comfortable outpatient environment, and its website is www.cranecreeksurgerycenter.com.

●

Up until its sale and leaseback on March 31, 2016, Marina
Towers, a 78,000 square foot, Class A, six-story building located on the Indian River in Melbourne, Florida, was owned by our
wholly owned subsidiaries, FCID Holdings, Inc. (“FCID Holdings”),
which held 99% ownership, and MTMC of Melbourne, Inc., which held 1% ownership. On March 31, 2016, we completed the sale of Marina Towers to Global Medical REIT Inc. for a
purchase price of $15.45 million. In addition, our wholly owned subsidiary, Marina Towers, LLC, leased back the entire
facility via a 10-year absolute triple-net master lease agreement that will expire in 2026 and be renewable for two five-year
periods on the same terms and conditions as the primary lease term with the exception of rent, which will be adjusted to the
prevailing market rent at renewal and will escalate in successive years during the extended lease period. In September
2016, both FCID Holdings and MTMC of Melbourne were dissolved and Marina Towers, LLC became wholly owned by First Choice
Healthcare Solutions, Inc.

Serving Florida’s
Space Coast region, FCMG, TBC and CCSC comprise our Company’s flagship integrated healthcare services delivery platform.
It is our goal to replicate our integrated platform model in other geographic markets throughout the southeast region of the United
States. By centralizing current and future systems’ business management functions, including call center operations, scheduling,
billing, compliance, accounting, marketing, advertising, legal, information technology and record-keeping at our corporate headquarters,
we will maintain efficiencies and scales of economies. We believe our structure will enable our staff physicians to focus on the
practice of medicine and the delivery of quality care to the patients we serve, as opposed to having their time and attention focused
on business administration responsibilities and other business concerns.

Our Healthcare Services
Business

Our
physicians and care specialists are recruited and retained with an emphasis on best practices and attitude: that being committed
to meeting and exceeding the care needs of patients and their families. Moreover, all employees –from the receptionists to
the doctors – are considered caregivers who put the patient first. Our caregivers cooperate with one another through a common
focus on the best interests and personal goals of each patient. We also consider family members and friends of patients to be vital
components of the care team.

Care is focused on each
patient’s full continuum of care, which requires a more personalized approach to treatment. It is the mission of our team
to customize care to ensure that each patient’s needs, values and choices are always considered, which squarely aligns with
our corporate slogan of “transforming healthcare delivery, one patient at a time.”

Our caregivers listen to
and honor the perspectives and choices of patients and their families. Moreover, our caregivers communicate and share complete
and unbiased information with patients and families in ways that are affirming and useful in decision-making processes. Our care
delivery practices exemplify the very definition of patient-centric care, explicitly recognizing the importance of human interaction
in terms of personalized care, kindness and being `present’ with patients.

Our patient-centric culture
strives to include providing an inviting, easily accessible, peaceful, healing environment that is aesthetically pleasing and designed
specifically to allay patient fear, anxiety and discomfort. The design and decor of our lobbies and diagnostic and treatment rooms
are intended to define and reinforce a strong and relevant brand image of quality, patient-centered care.

We also utilize the most
advanced diagnostic technologies coupled with the latest in individualized care, including trigger point injections and pharmacological,
Physical/Occupational Therapy (“PT/OT”), Neurological, Orthopaedic, Chiropractic and massage therapy treatments.

FCMG’s care
facilities, located in Marina Towers in Melbourne, Florida, house both a digital GE X-Ray system and a GE 450 MRI Gem Suite system,
which is physically positioned to capitalize on the expansive waterfront view of the Indian River, promoting patient relaxation
and soothing fear and anxiety. We also operate a fully equipped outpatient physical and occupational therapy center on the second
floor of Marina Towers, where our skilled physical and occupational therapists and technicians work with our patients to help
restore and improve their motion, function and quality of life.

In addition to our main
clinical office in Melbourne, FCMG physicians also see patients at TBC’s main practice location in Melbourne, and
in a satellite office located in Viera, Florida, located approximately 13 miles northwest of Marina Towers.

TBC is located only a
half mile south of Marina Towers in Melbourne on the fifth and sixth floors of the Crane Creek Medical Center building.
In addition to its main office in Melbourne, the practice also
sees patients at a satellite office in Merritt Island, Florida, located approximately 20 miles north of Melbourne.

5

Crane Creek Surgery Center,
also located in the Crane Creek Medical Center building, on the fifth floor, houses four state-of-the-art operating rooms and
a medical procedure room; and has capacity to host 4,000-5,000 surgical procedures each year.

As there are numerous
definitions of a “Healthcare Services Delivery Platform,” we have strictly defined what we believe is qualified
to be a First Choice platform to ensure that our high standards for patient care and attention can be fostered and preserved.
More specifically, each of our localized platforms will:

●

be comprised of one or more medical practices
focused on Orthopaedic and Spine care and treatment, and be geographically situated near one or more primary hospitals in a
given, high growth geographic market;

●

employ a team of first rate physicians, surgeons and care specialists all of whom are subject to our rigorous qualification and hiring process;

●

provide for the combination of synergistic medical disciplines related to the practice of Orthopaedic and Spine medicine, while supported by related in-house diagnostic and ancillary services, including, but not limited to,ambulatory surgery center, MRI, X-Ray, DME and PT/OT – collectively, services must elegantly coalesce to provide superior patient-centric care that span a patient’s entire episode of care – from diagnosis to treatment to recovery; and

●

be capable of generating revenues of up to $65 million when the platform is fully built out,
based on current reimbursement rates.

Because we have a
specific vision for the delivery of optimal patient experience, we continually reinforce the importance of hiring, training,
evaluating, compensating and supporting a workforce committed to patient-centered care. Just as vital, we engage our
employees in all aspects of process design and treat them with the same dignity and respect that they are expected to show
patients and family members. Central to our long-term growth strategy is attracting and recruiting top tier physicians and
care specialists that rank in the top percentile of performance in the local markets we serve; and creating a work
environment and corporate culture that serves to engage, motivate and retain them.

Given sweeping healthcare
reform, increased regulatory and reimbursement mandates and the financial challenges each of these impose, remaining in private
practice is quickly losing its appeal for many physicians. In fact, according to a July 2015 report published by a leading consulting
firm, a growing number of U.S. doctors are leaving private practice for hospital employment and only one in three will remain independent
by the end of 2016. Thus, the opportunity for our Company to attract key medical talent has never been more robust.

Our systems of operation
unburden our physicians from the business administration responsibilities associated with operating a medical practice, group
or clinic. More specifically, we believe that physicians will choose employment with us because we can offer them the advantages
and benefits of being able to focus exclusively on delivering excellent patient care; enjoying higher income potential; realizing
freedom from day-to-day practice administration, marketing and generating new patient leads; having direct access to state-of-the-art
technology, diagnostics and ancillary services; and experiencing strong camaraderie with a collaborating cadre of first rate caregivers
dedicated to common, patient-centered treatment goals and objectives. The requirements for running the day-to-day business functions
of the Centers are the sole responsibility of our management team —and not the physicians. Simply put, First Choice allows
Doctors to be Doctors.

Based on the dynamic growth
taking place on Florida’s Space Coast, we are currently estimating that the total market opportunity for Orthopaedic and
Spine care approximates $150 million annually, and we are working towards capturing a larger share of that market. Moreover, it
is our belief that we will ultimately succeed at replicating our Melbourne Platform in other attractive, high growth geographic
regions. In fact, we have identified over 250 locations in the country where we believe our unique business model can be successfully
replicated and represent opportunities to build out healthcare delivery services platforms which are each capable
of generating up to $65 million in annual revenues. Moving forward, we are now concentrating our efforts on determining the best
top 10 markets for expansion consideration.

In
an effort to fully round out our Melbourne Platform to address a patient’s end-to-end episode of care, we have
begun exploring opportunities to either acquire or organically establish the infrastructure necessary to support the offering
of both pharmacy and home health services. We are also planning to expand the number of PT/OT centers that we operate to
provide greater travel convenience for our patients being served by our Melbourne Platform. Currently, we own and operate
one state-of-the-art PT/OT center in Melbourne with the expectation in 2017 that we will expand to a total of five
centers geographically situated across Brevard County, Florida, which extends 72 miles from north to south on Florida’s
central eastern coast.

Our longer term strategic
focus is to grow primarily in select southeastern U.S. markets by successfully replicating our Melbourne Platform – both
organically and through strategic acquisitions. More specifically, our growth will be fueled by hiring best-in-class Orthopaedic
physicians currently practicing in our target expansion markets and are seeking an alternative to owning and operating their own
private practices or being employed by local hospitals; and by acquiring well-established Orthopaedic physician practices and
medical groups in our target markets; then adding, as necessary, diagnostic and ancillary services, to include, but not be limited
to, an ambulatory surgery center, MRI, X-Ray, DME and PT/OT.

Additional criteria
for future Medical Centers of Excellence include opportunities to support economies of scale in billing, collections,
purchasing, advertising and compliance which can be fully leveraged to reduce expense and fuel income growth;
and opportunities to increase awareness of our brand by aligning with patients, referring physicians, medical institutions,
insurers, employers and other healthcare stakeholders in local markets that share our core values.

Our business model is
centered on our team physicians being employees, thereby permitting us to optimize revenue generation from both physicians
and ancillary services, while also providing our employed care providers with the ability to refer patients to our on-site
diagnostic and ancillary services. Physician-owned practices, on the other hand, may be subject to prevailing federal
regulations (e.g., The Ethics in Patient Referral Act of 1989, as amended; more commonly known as the “Stark
Law”), which may limit their ability to refer patients for certain healthcare services provided by entities in which a
physician-owner(s) has a financial interest.

We
believe that our centralized system of back office operations will continue to allow us to achieve measurable cost and
productivity efficiencies as we expand the number of centers and platforms we own and operate. We have specifically designed
our centralized back office system to alleviate staff physicians from business administration responsibilities associated
with operating a medical practice or clinic, enabling them to focus strictly on caring for the patients we serve. Physicians
who own and manage their own private practices or clinics typically have to devote valuable time and resources to addressing
business concerns – time and resources that might otherwise be spent on treating their patients.

Medical Service Mix

Similar
to other business models for professional services, our business model is designed to offer a synergistic and profitable
medical service mix. By their nature, some combinations of medical specialties can generate more revenue than others.
Physicians need access to diagnostic equipment and ancillary services, such as outpatient surgery facilities, MRI, X-ray, DME
and PT/OT. Moreover, most patients expect their physicians to have access to the best diagnostic and service delivery
equipment. Without diagnostic services, many medical practices may find it difficult to maintain their current margins of
profitability.

7

We integrate both
medical specialties and ancillary and diagnostic services on our platforms to maintain or enhance our profits. While one
specialty may have high reimbursements for their professional services but insufficient volume to profitably support
necessary diagnostic equipment, another medical specialty may have lower professional service reimbursements but high volume
of diagnostic equipment use. Operating independently, each specialty group would face retreating profit margins and confront
significant challenges to maintaining high service levels with adequate equipment and advanced technologies. However,
operating together, they create the optimal mix of professional service fee income, diagnostic equipment procedure income and
ancillary service income. Since the combination is more profitable than the stand-alone components, there is a favorable
opportunity to sustain profit margins that will allow each of our integrated healthcare services delivery platform to
maintain high service levels with state-of-the-art equipment and ancillary service offerings.

In addition, by offering
healthcare services that address a patient’s entire episode of care, we believe that we are well positioned to begin offering
the government, major health plans and large self-insured employer groups with bundled payment programs for a broad range of Orthopaedic
and Spine surgical procedures, including total hip and knee replacements. In doing so, we believe we will be able to ultimately
lower the cost of episodes of care up to 15% for these payor organizations while achieving optimal outcomes for our patient and
margin expansion for our Company.

Scalable Back Office and Economies of
Scale

Fixed cost legacy administrative
functions have subjected many established medical centers to a downward spiral of diminishing profit margins and losses. In traditional
clinical practices, administrative management, billing, compliance, accounting, marketing, advertising, scheduling, customer service
and record keeping functions represent fixed overhead for the practice. There is no opportunity to share this fixed overhead with
another practice. The fixed administrative overhead of a practice has the effect of reducing profit margins if the practice experiences
declining revenues because of lower patient volumes, lower reimbursements or patient migration to competitors.

A key to our success
will be our ability to continue to support a highly experienced management team with an array of professional, experienced
and regulatory compliant subcontractors. Using project management best practices, our corporate managers use experienced
medical subcontractors to perform billing, compliance, accounting, marketing, advertising, legal, information technology and
record keeping functions on behalf of our Medical Centers of Excellence. It is our plan that the cost of our “back
office operations” will not increase in direct relation to the growth of our network of integrated healthcare delivery
platforms, which will allow us to sustain profit margins across our business operations with a cost effective and scalable
back office. As the numbers of our care providers and Medical Centers of Excellence increase, the economies of scale for our
back office operations will also increase. These economies of scale support selecting the best and not the lowest cost
subcontractors, while allowing our current Melbourne Platform and future platforms to operate cost effectively with higher
service levels.

Specifically,
we currently provide all of the administrative services necessary to support the practice of medicine by our physicians and improve
operating efficiencies of our current and future Medical Centers of Excellence:

●

Recruiting and Credentialing. We have proven experience in locating, qualifying,
recruiting and retaining experienced physicians. In addition to the verification of credentials, licenses and references of all
prospective physician candidates, each caregiver undergoes Level 2 background checks. We maintain a national database of practicing
physicians. In addition to our database of physicians, we recruit locally through trade advertising, the American Academy of Orthopaedic
Surgeons and referrals from our physicians and other stakeholders.

●

Billing, Collection and Reimbursement. We assume responsibility for contracting with
third-party payors for all of our physicians; and we are responsible for billing, collection and reimbursement for services rendered
by our physicians. In all instances, however, we do not assume responsibility for charges relating to services provided by hospitals
or other referring physicians with whom we collaborate. Such charges are separately billed and collected by the hospitals or other
physicians. The majority of our third-party payors remit by EFT and wire transfers. Accordingly, every aspect of our business is
positioned to achieve high productivity, lower administrative headcounts and lower per patient expense. We provide our physicians
with a training curriculum that emphasizes detailed documentation of and proper coding protocol for all procedures performed and
services provided; and we provide comprehensive internal auditing processes, all of which are designed to achieve appropriate coding,
billing and collection of revenue for physician services. All of our billing and collection operations are controlled and will
continue to be controlled from our business offices located at our corporate headquarters in Melbourne, Florida.

8

●

Risk Management and Other Services. We maintain
a risk management program focused on reducing risk, including the identification and communication of potential risk areas to our
medical staff. We maintain professional liability coverage for our group of healthcare professionals. Through our risk management
staff, we conduct risk management programs for loss prevention and early intervention in order to prevent or minimize professional
liability claims. In addition, we provide a multi-faceted compliance program that is designed to assist our multi-specialty Medical
Centers of Excellence fully comply with increasingly complex laws and regulations. We also manage all information technology, facilities
management, legal support, marketing support, regulatory compliance and other services.

Developing
and operating additional healthcare services delivery platforms in other geographic areas will take advantage of the
economies of scale for our administrative back office functions. Our business development plan calls for replicating our
Melbourne Platform in other cities and states at a pace that will allow us to maintain the same levels of quality and
acceptable profitability from each geographic region. We believe that the scalable structure of our administrative back
office functions can efficiently support our expansion plans.

Successful retail models
in other industries have proven effective at using telecommunications, remote computing, mobile computing, cloud computing, virtual
networks and other leading-edge technologies to manage geographically diverse operating units. These technologies create an electronically
distributed infrastructure which allow a central management team to monitor, direct and control geographically dispersed operating
units and subcontractors, including national operations.

We believe that our business
model incorporates the best distributed infrastructure supported by these technologies. A central management team monitors, directs
and controls our medical operations, and will control our future multi-specialty Medical Centers of Excellence, as well as the
necessary support subcontractors that may be required by their operations.

Our administrative operations
are centered on a secure paperless practice management platform. We utilize a state-of-the-art, cloud-based electronic medical
record (“EMR”) management system, which provides ready access to each patient’s test results from anywhere in
the world where there is Internet connectivity, including X-Ray and MRI images, diagnosis, patient and doctor notes, visit reports,
billing information, insurance coverage, patient identification and personalized care delivery requirements. Our EMR system fully
complies with Stages 1 and 2 Meaningful Use standards defined by the Centers for Medicare & Medicaid Services Incentive Programs.
These programs govern the use of electronic health records and allow us to earn incentive payments from the U.S. government, pursuant
to the Health Information Technology for Economic and Clinical Health (HITECH) Act, which was enacted as part of the American Recovery
and Reinvestment Act of 2009.

We intend to grow by replicating
our healthcare services delivery platform currently in place in Melbourne, Florida in other geographic markets, and by hiring additional
physicians to serve patients in our current and future Medical Centers of Excellence - all of which will be supported by our standardized
policies, procedures and clinic setup guidelines. We believe our administrative functions can be quickly scaled to handle multiple
additional Centers and/or physicians. As we roll out our business model, we expect our administrative core and clinical model will
assist us in maintaining economies of scale for all of our localized integrated healthcare systems.

9

Referral and Partnering Relationships

Our business model leverages
the direct contact and daily interaction that our physicians have with their patients, and emphasizes a patient-centric, shared
clinical approach that also serves to address the needs of our various “partners,” including hospitals, third-party
payors, referring physicians, our physicians and, most importantly, our patients. Our relationships with our partners are important
to our continued success.

Hospitals

Our relationships
with our hospital partners are critical to our operations. We work with our hospital partners to market our services to
referring physicians, an important source of hospital admissions within the communities served by those hospitals. In
addition, a majority of our physicians maintain regular hospital privileges, as well as trauma privileges where available, to
ensure best in class healthcare is available to our patients and the community. The contracts we have with hospitals allow us
to be responsible for billing patients and third-party payors for services rendered by our physicians separately from other
related charges billed by the hospital or other physicians within the hospital to the same payors.

Third-Party Payors

Our
relationships with government-sponsored plans, including Medicare and TRICARE, managed care organizations and commercial health
insurance payors are vital to our business. We seek to maintain professional working relationships with our third-party payors,
streamline the administrative process of billing and collection, and assist our patients and their families in understanding their
health insurance coverage and any balances due for co-payments, co-insurance, deductibles or out-of-network benefit limitations.
In addition, through our quality initiatives and continuing research and education efforts, we have sought to enhance clinical
care provided to patients, which we believe benefits third-party payors by contributing to improved patient outcomes and reduced
long-term health system costs.

We receive compensation
for professional services provided by our physicians to patients based upon established rates for specific services provided, principally
from third-party payors. Our billed charges are substantially the same for all parties in a particular geographic area, regardless
of the party responsible for paying the bill for our services. Approximately one-third of our net patient service revenue is received
from government-sponsored plans, principally Medicare and TRICARE programs.

Medicare is a health insurance
program primarily for people 65 years of age and older, certain younger people with disabilities and people with end-stage renal
disease. The program is provided without regard to income or assets and offers beneficiaries different ways to obtain their medical
benefits. The most common option selected today by Medicare beneficiaries is the traditional fee-for-service payment system. Other
options include managed care, preferred provider organizations, private fee-for-service and specialty plans. TRICARE is the healthcare
program for U.S. military service members (active, Guard/Reserve and retired) and their families around the world. TRICARE is managed
by the Defense Health Agency under leadership of the Assistant Secretary of Defense. Both Medicare and TRICARE compensation rates
are generally lower in comparison to commercial health plans. In order to participate in government programs, our Medical Centers
of Excellence must comply with stringent and often complex enrollment and reimbursement requirements.

We
also receive compensation pursuant to contracts with commercial payors offering a wide variety of health insurance products, such
as health maintenance organizations, preferred provider organizations and exclusive provider organizations that are subject to
various state laws and regulations, as well as self-insured organizations subject to federal Employee Retirement Income Security
Act (“ERISA”) requirements. We seek to secure mutually agreeable contracts with payors that enable our physicians to
be listed as in-network participants within the payors’ provider networks.

If we do not have a contractual
relationship with a health insurance payor, we generally bill the payor our full billed charges. If payment is less than billed
charges, we bill the balance to the patient, subject to state and federal laws regulating such billing. Although we maintain standard
billing and collections procedures, we also provide discounts and/or payment option plans in certain hardship situations where
patients and their families do not have the financial resources necessary to pay the amount due at the time services are rendered.
Any amounts written-off related to private-pay patients are based on the specific facts and circumstances related to each individual
patient account.

10

Referring Physicians and Practice Groups

Our relationships with
our referring physicians and referring practice groups are critical to our success. Our physicians seek to establish and maintain
long-term professional relationships with referring physicians in the communities where we practice. We believe that our community
presence, through our hospital coverage and Medical Centers of Excellence, assists referring physicians with further enhancing
their practices by providing well-coordinated and highly responsive care to their patients who require our musculoskeletal services,
diagnostic services and rehabilitative care.

Government Regulation

The healthcare industry
is governed by a framework of federal and state laws, rules and regulations that are extensive and complex and for which, in many
cases, the industry has the benefit of only limited judicial and regulatory interpretation. If one of our physicians or physician
practices is found to have violated these laws, rules or regulations, our business, financial condition and results of operations
could be materially adversely affected. Moreover, the Affordable Care Act signed into law in March 2010 contains numerous provisions
that are reshaping the United States healthcare delivery system, and healthcare reform continues to attract significant legislative
interest, regulatory activity, new approaches, legal challenges and public attention that create uncertainty and the potential
for additional changes. Healthcare reform implementation, additional legislation or regulations, and other changes in government
policy or regulation may affect our reimbursement, restrict our existing operations, limit the expansion of our business or impose
additional compliance requirements and costs, any of which could have a material adverse effect on our business, financial condition,
results of operations, cash flows and the trading price of our Common Stock.

Fraud and Abuse Provisions

Existing federal laws governing
Medicare, TRICARE and other federal healthcare programs (the “FHC Programs”), as well as similar state laws, impose
a variety of fraud and abuse prohibitions on healthcare companies like us. These laws are interpreted broadly and enforced aggressively
by multiple government agencies, including the Office of Inspector General of the Department of Health and Human Services, the
Department of Justice (the “DOJ”) and various state authorities.

The fraud and abuse laws
include extensive federal and state regulations applicable to our financial relationships with hospitals, referring physicians
and other healthcare entities. In particular, the federal anti-kickback statute prohibits the offer, payment, solicitation or receipt
of any remuneration in return for either referring Medicare, TRICARE or other FHC Program business, or purchasing, leasing, ordering
or arranging for or recommending any service or item for which payment may be made by an FHC Program. In addition, federal physician
self-referral legislation, commonly known as the “Stark Law,” prohibits a physician from ordering certain designated
health services reimbursable by Medicare from an entity with which the physician has a prohibited financial relationship. These
laws are broadly worded and, in the case of the anti-kickback statute, have been broadly interpreted by federal courts, and potentially
subject many healthcare business arrangements to government investigation and prosecution, which can be costly and time consuming.

There
are a variety of other types of federal and state fraud and abuse laws, including laws authorizing the imposition of
criminal, civil and administrative penalties for filing false or fraudulent claims for reimbursement with government
healthcare programs. These laws include the civil False Claims Act (“FCA”), which prohibits the submitting of or
causing to be submitted false claims to the federal government or federal government programs, including Medicare, the
TRICARE program for military dependents and retirees, and the Federal Employees Health Benefits Program. The FCA also applies
to the improper retention of known over payments and includes “whistleblower” provisions that permit private
citizens to sue a claimant on behalf of the government and thereby share in the amounts recovered under the law and to
receive additional remedies.

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In addition, federal and
state agencies that administer healthcare programs have at their disposal statutes, commonly known as “civil money penalty
laws,” that authorize substantial administrative fines and exclusion from government programs in cases where an individual
or company that filed a false claim, or caused a false claim to be filed, knew or should have known that the claim was false or
fraudulent. As under the FCA, it often is not necessary for the agency to show that the claimant had actual knowledge that the
claim was false or fraudulent in order to impose these penalties.

If we were excluded from
any government-sponsored healthcare programs, not only would we be prohibited from submitting claims for reimbursement under such
programs, but we also would be unable to contract with other healthcare providers, such as hospitals, to provide services to them.
It could also adversely affect our ability to contract with, or to obtain payment from, non-governmental payors.

Government Reimbursement Requirements

In order to participate
in the Medicare program, we must comply with stringent and often complex enrollment and reimbursement requirements. These programs
generally provide for reimbursement on a fee-schedule basis rather than on a charge-related basis, we generally cannot increase
our revenue by increasing the amount we charge for our services. To the extent our costs increase, we may not be able to recover
our increased costs from these programs, and cost containment measures and market changes in non-governmental insurance plans have
generally restricted our ability to recover, or shift to non-governmental payors, these increased costs. In attempts to limit federal
and state spending, there have been, and we expect that there will continue to be, a number of proposals to limit or reduce Medicare
reimbursement for various services.

HIPAA and Other Privacy Laws

Numerous federal and state
laws, rules and regulations govern the collection, dissemination, use and confidentiality of protected health information, including
the federal Health Insurance Portability and Accountability Act of 1996, as amended (“HIPAA”), and its implementing
regulations, violations of which are punishable by monetary fines, civil penalties and, in some cases, criminal sanctions. As part
of our medical record keeping, third-party billing, research and other services, we and our affiliated practices collect and maintain
protected health information on the patients that we serve.

Health
and Human Services Security Standards require healthcare providers to implement administrative, physical and technical safeguards
to protect the integrity, confidentiality and availability of individually identifiable health information that is electronically
received, maintained or transmitted (including between us and our affiliated practices). We have implemented security policies,
procedures and systems designed to facilitate compliance with the HIPAA Security Standards.

In
February 2009, Congress enacted the Health Information Technology for Economic and Clinical Health Act (“HITECH”) as
part of the American Recovery and Reinvestment Act (“ARRA”). Among other changes to the law governing protected health
information, HITECH strengthens and expands HIPAA, increases penalties for violations, gives patients new rights to restrict uses
and disclosures of their health information, and imposes a number of privacy and security requirements directly on our “Business
Associates,” which are third-parties that perform functions or services for us or on our behalf.

In addition to the federal
HIPAA and HITECH requirements, numerous other state and certain other federal laws protect the confidentiality of patient information,
including state medical privacy laws, state social security number protection laws, human subjects research laws and federal and
state consumer protection laws. In some cases, state laws are more stringent than HIPAA and therefore, are not preempted by HIPAA.

Environmental Regulations

Our healthcare operations
generate medical waste that must be disposed of in compliance with federal, state and local environmental laws, rules and regulations.
Our office-based operations are subject to compliance with various other environmental laws, rules and regulations. Such compliance
does not, and we anticipate that such compliance will not, materially affect our capital expenditures, financial position or results
of operations.

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Compliance Program

We
maintain a compliance program that reflects our commitment to complying with all laws, rules and regulations applicable to our
business and that meets our ethical obligations in conducting our business (the “Compliance Program”). We believe
our Compliance Program provides a solid framework to meet this commitment and our obligations as a provider of healthcare services,
including:

●

a Compliance Committee consisting of our senior executives;

●

our Code of Ethics, which is applicable to our employees, officers and directors;

●

a disclosure program that includes a mechanism to enable individuals to disclose on a confidential
or anonymous basis to our Chief Executive Officer, or any person who is not in the disclosing individual’s chain of command,
issues or questions believed by the individual to be a potential violation of criminal, civil, or administrative laws;

●

an organizational structure designed to integrate our compliance objectives into our corporate
offices and Medical Centers of Excellence; and

●

education, monitoring and corrective action programs, including a disclosure policy designed to
establish methods to promote the understanding of our Compliance Program and adherence to its requirements.

The foundation of our Compliance
Program is our Code of Ethics which is intended to be a comprehensive statement of the ethical and legal standards governing
the daily activities of our employees, affiliated professionals, independent contractors, officers and directors. All our personnel
are required to abide by, and are given thorough education regarding, our Code of Ethics. In addition, all employees are
expected to report incidents that they believe in good faith may be in violation of our Code of Ethics.

Legal Proceedings

From time to time, we
may become involved in lawsuits and legal proceedings which arise in the ordinary course of business including potential disputes
with patients. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may
arise from time to time that may harm our business. Our contracts with hospitals generally requires us to indemnify them and their
affiliates for losses resulting from the negligence of our physicians. Currently, we have no pending litigation that is deemed
to be material.

Although we currently maintain
liability insurance coverage intended to cover professional liability and certain other claims, we cannot assure that our insurance
coverage will be adequate to cover liabilities arising out of claims asserted against us in the future where the outcomes of such
claims are unfavorable to us. Liabilities in excess of our insurance coverage, including coverage for professional liability and
certain other claims, could have a material adverse effect on our business, financial condition and results of operations.

The B.A.C.K. Center (“TBC”)
has had a claim filed in Brevard County, Florida Circuit Court against Health First Management, Inc. (“Health First”)
due to a contract dispute that predates our Company’s involvement with TBC. The dispute is currently in advanced settlement
discussions. Irrespective of the settlement outcome, our Company will not receive any settlement fees nor will we be subject to
paying any settlement fees.

Professional and General Liability Coverage

We maintain professional
and general liability insurance policies with third-party insurers on a claims-made basis, subject to deductibles, self-insured
retention limits, policy aggregates, exclusions, and other restrictions, in accordance with standard industry practice. We believe
that our insurance coverage is appropriate based upon our claims experience and the nature and risks of our business. However,
we cannot assure that any pending or future claim will not be successful or if successful will not exceed the limits of available
insurance coverage.

Our Headquarters

Our corporate headquarters
is located on the shore of the Indian River at 709 S. Harbor City Boulevard, Suite 530, Melbourne, Florida 32901 in Marina Towers.
Our corporate website is www.myfchs.com.

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Employees

As of December 31, 2016,
we employed 148 employees, which included 13 physicians and eight physician assistants/ARNPs.

Annual Patient Visits,
Total Number of Surgeries and Average Patient Value

During the year ended
December 31, 2016, our Melbourne Platform managed approximately 100,000 patient visits and performed 2,667 Orthopaedic
and Spine surgical procedures, which is a 29.5% increase over 2,060 surgical procedures performed in 2015. Our Average
Patient Value (“APV”) – which is factored by dividing total patient service fees comprised of all medical and
ancillary service fees by the total number of surgeries performed in a given timeframe – was $8,627 in 2015 and increased
17.6% to $10,144 in 2016.

Where You Can Find Additional Information

We are subject to the reporting
requirements under the Exchange Act. We file with, or furnish to, the SEC quarterly reports on Form 10-Q, current reports on Form
8-K and amendments to those reports, and will furnish our proxy statement. These filings are available free of charge on our website,
www.myfchs.com, shortly after they are filed with, or furnished to, the SEC. The SEC maintains an Internet website, www.sec.gov,
which contains reports and information statements and other information regarding issuers.

ITEM 1A.

RISK FACTORS

The risk factors discussed
below could cause our actual results to differ materially from those expressed in any forward-looking statements. Although we have
attempted to list comprehensively these important factors, we caution you that other factors may in the future prove to be important
in affecting our results of operations. New factors emerge from time to time and it is not possible for us to predict all of these
factors, nor can we assess the impact of each such factor on the business or the extent to which any factor, or combination of
factors, may cause actual results to differ materially from those contained in any forward-looking statement.

The risks described below
set forth what we believe to be the most material risks associated with the purchase of our Common Stock. Before you invest in
our Common Stock, you should carefully consider these risk factors, as well as the other information contained in this prospectus.

GENERAL RISKS REGARDING OUR HEALTHCARE SERVICES
BUSINESS

We have a limited operating history that
impedes our ability to evaluate our potential future performance and strategy.

We have owned and operated
our model Medical Center of Excellence, First Choice Medical Group, since 2012; and assumed management control of The B.A.C.K.
Center, effective May 1, 2015, and of Crane Creek Surgery Center, effective October 1, 2015. With our current Medical Centers
of Excellence in Melbourne serving as our “Healthcare Services Delivery Platform” model, we plan to replicate this
model in targeted geographic markets, principally in the southeastern region of the U.S. Our limited operating history makes it
difficult for us to evaluate our future business prospects and make decisions based on estimates of our future performance. To
address these risks and uncertainties, we must do the following:

●

Successfully execute our business strategy to establish and extend the “First
Choice Healthcare Solutions” brand and reputation as a profitable, well-managed enterprise committed to delivering quality
and cost-effective healthcare primarily in parts of the southeastern United States and then pursue select other U.S. markets;

●

Respond to competitive developments;

●

Effectively and efficiently integrate new Medical Centers of Excellence into integrated
healthcare systems;

●

Provide physicians with a compelling alternative to independent medical practice management
or hospital employment; and

●

Attract, integrate, retain and motivate qualified personnel.

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We cannot be certain that
our business strategy will be successful or that we will successfully address these risks. In the event that we do not successfully
address these risks, our business, prospects, financial condition and results of operations may be materially and adversely affected.

If we do not meet the accounting requirements
to treat the transactions with The B.A.C.K. Center and Crane Creek Surgery Center, as a Variable Interest Entity, or any future
transaction, we will not be permitted to consolidate the results of operations of such entities with those of our Company.

We have determined that
The B.A.C.K. Center and Crane Creek Surgery Center are each a Variable Interest Entity (“VIE”) in accordance with Financial
Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 810, “Consolidation.”
In evaluating whether we have the power to direct the activities of a VIE that most significantly impact its economic performance,
we consider the purpose for which the VIE was created, the importance of each of the activities in which it is engaged and our
Company’s decision-making role, if any, in those activities that significantly determine the entity’s economic performance
as compared to other economic interest holders. This evaluation requires consideration of all facts and circumstances relevant
to decision-making that affects the entity’s future performance and the exercise of professional judgment in deciding which
decision-making rights are most important.

In determining whether
we have the right to receive benefits or the obligation to absorb losses that could potentially be significant to the VIE, we evaluate
all of our economic interests in the entity, regardless of form (debt, equity, management and servicing fees, and other contractual
arrangements). This evaluation considers all relevant factors of the entity’s structure, including: the entity’s capital
structure, contractual rights to earnings (losses), subordination of our interests relative to those of other investors, contingent
payments, as well as other contractual arrangements that have potential to be economically significant. The evaluation of each
of these factors in reaching a conclusion about the potential significance of our economic interests is a matter that requires
the exercise of professional judgment.

In
the event that either The B.A.C.K. Center or Crane Creek Surgery Center transaction fails to meet the FASB and ASC requirements
for consolidation, it could have a material adverse effect on our business and results of operations.

As part of our growth strategy,
First Choice Healthcare Solutions regularly considers strategic transactions, including acquisitions and V.I.E. transactions. For
example, in 2015, we added The B.A.C.K. Center and Crane Creek Surgery Center to our integrated healthcare platform in Melbourne,
Florida with the expectation that these V.I.E. transactions will result in various benefits, including, among others, an expanded
range of healthcare services to patients in the community, cost savings and increased profitability of the businesses by improving
operating efficiencies. Achieving the anticipated benefits is subject to a number of uncertainties, including whether we integrate
our acquired companies in an efficient and effective manner, and general competitive factors in the marketplace. Failure to achieve
these anticipated benefits could result in increased costs, decreases in the amount of expected revenues and diversion of management’s
time and resources.

In addition, effective
internal controls are necessary for us to provide reliable and accurate financial reports and to effectively prevent fraud. The
integration of acquired businesses is likely to result in our systems and controls becoming increasingly complex and more difficult
to manage.

We devote significant resources
and time to comply with the internal control over financial reporting requirements of the Sarbanes-Oxley Act of 2002. However,
we cannot be certain that these measures will ensure that we design, implement and maintain adequate control over our financial
processes and reporting in the future, especially in the context of acquisitions or assuming management control over other businesses.
Any difficulties in the assimilation of acquired businesses into our Company’s control system could harm our operating results
or cause us to fail to meet our financial reporting obligations. Inferior internal controls could also cause investors to lose
confidence in our Company’s reported financial information, which could have a negative effect on the trading price of First
Choice’s stock and our access to capital.

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We are implementing a strategy to grow
our business by hiring additional physicians to create localized integrated healthcare systems comprised of Medical Centers of
Excellence in select U.S. markets, which requires significant additional capital and may not generate income.

We intend to grow our
business by hiring additional physicians to create Medical Centers of Excellence or to acquire certain assets of well-established
practices in select U.S. markets. We estimate the cost to create each additional Medical Center of Excellence to be approximately
$6-8 million. Although we may raise funds through equity offerings to implement our growth strategy, these funds may not be adequate
to offset all of the expenses we incur in expanding our business. We will need to generate revenues to offset expenses associated
with our growth, and we may be unsuccessful in achieving sufficient revenues, despite our attempts to grow our business. If our
growth strategies do not result in sufficient revenues and income, we may have to abandon our plans for further growth and/or
cease operations, which could have a material and adverse effect on our business, prospects and financial condition.

In order to pursue our business strategy,
we will need to raise additional capital. If we are unable to raise additional capital, our business may fail.

We may need to raise additional
capital to pursue our business plan, which includes hiring additional physicians in order to expand our business operations and
to acquire or develop new Medical Centers of Excellence and localized integrated healthcare systems. We believe that we have access
to capital resources through possible public or private equity offerings, debt financings, corporate collaborations or other means.
If the economic climate in the United States does not continue to improve or further deteriorates, our ability to raise additional
capital could be negatively impacted. If we are unable to secure additional capital, we may be required to curtail our initiatives
and take additional measures to reduce costs in order to conserve our cash in amounts sufficient to sustain operations and meet
our financial obligations.

We may not be able to achieve the expected
benefits from opening new Medical Centers of Excellence, which would adversely affect our financial condition and results.

We plan to rely on hiring
additional physicians to create FCHS-branded Medical Center of Excellence as a method of expanding our business. If we do not successfully
integrate such new Medical Centers of Excellence, we may not realize anticipated operating advantages and cost savings. The integration
of these new Medical Centers of Excellence into our business operations involves a number of risks, including:

●

Demands on management related to the increase in our Company’s size with the establishment
of each new Medical Center of Excellence, which is crucial to our business plan;

●

The diversion of management’s attention from the management of daily operations to the integration
of operations of the new Medical Centers of Excellence;

●

Difficulties in the assimilation and retention of employees;

●

Potential adverse effects on operating results; and

●

Challenges in retaining patients from the new physicians.

Further,
the successful integration of the new physicians will depend upon our ability to manage the new physicians and to eliminate redundant
and excess costs. Difficulties in integrating new physicians may not be able to achieve the cost savings and other size-related
benefits that we hoped to achieve, which would harm our financial condition and operating results.

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If we are unable to attract and retain
qualified medical professionals, our ability to maintain operations at our existing Medical Centers of Excellence, attract patients
or open new multi-specialty Medical Centers of Excellence could be negatively affected.

We generate our revenues
through physicians and medical professionals who work for us to perform medical services and procedures. The retention of those
physicians and medical professionals is a critical factor in the success of our medical multi-specialty Centers, and the hiring
of qualified physicians and medical professionals is a critical factor in our ability to launch new multi-specialty Medical Centers
of Excellence successfully. However, at times it may be difficult for us to retain or hire qualified physicians and medical professionals.
If we are unable consistently to hire and retain qualified physicians and medical professionals, our ability to open new Centers,
maintain operations at existing medical multi-specialty Centers, and attract patients could be materially and adversely affected.

We may have difficulties managing our Company’s growth,
which could lead to higher operating losses, or we may not grow at all.

Rapid
growth could strain our human and capital resources, potentially leading to higher operating losses. Our ability to manage operations
and control growth will be dependent upon our ability to raise and spend capital to successfully attract, train, motivate, retain
and manage new employees and continue to update and improve our management and operational systems, infrastructure and other resources,
financial and management controls, and reporting systems and procedures. Should we be unsuccessful in accomplishing any of these
essential aspects of our growth in an efficient and timely manner, then management may receive inadequate information necessary
to manage our operations, possibly causing additional expenditures and inefficient use of existing human and capital resources
or we otherwise may be forced to grow at a slower pace that could slow or eliminate our ability to achieve and sustain profitability.
Such slower than expected growth may require us to restrict or cease our operations and go out of business.

Since a significant percentage of our
operating expenses are fixed, a relatively small decrease in revenues could have a significant negative impact on our financial
results.

A significant percentage
of our expenses are currently fixed, meaning they do not vary significantly with our increase or decrease in revenues. Such expenses
include, but will not be limited to, debt service and capital lease payments, rent and operating lease payments, salaries, maintenance
and insurance. As a result, a small reduction in the prices we charge for our services or procedure volume could have a disproportionately
negative effect on our financial results.

Loss of key executives, limited experience
in operating a public company and failure to attract qualified managers and sales persons could limit our growth and negatively
impact our operations.

We depend upon our management
team to a substantial extent. In particular, we depend upon Christian C. Romandetti, our Chairman, President and Chief Executive
Officer, for his skills, experience and knowledge of our Company and industry contacts. The loss of Mr. Romandetti or other members
of our management team could have a material adverse effect on our business, results of operations or financial condition.

Our
limited experience in dealing with the increasingly complex laws pertaining to public companies could be a significant disadvantage
to us in that it is likely that an increasing amount of management’s time will be devoted to these activities which will
result in less time being devoted to the management and growth of our Company. It is possible that we will be required to expand
our employee base and hire additional employees to support our operations as a public company which will increase our operating
costs in future periods.

We require medical clinic
managers, medical professionals and marketing persons with experience in our industry to operate and market our medical clinic
services. It is impossible to predict the availability of qualified persons or the compensation levels that will be required to
hire them. The loss of the services of any member of our senior management or our inability to hire qualified persons at economically
reasonable compensation levels could adversely affect our ability to operate and grow our business.

17

We may be subject to medical professional
liability risks, which could be costly and could negatively impact our business and financial results.

We
may be subject to professional liability claims. Although there currently are no known hazards associated with any of our procedures
or technologies when performed or used properly, hazards may be discovered in the future. For example, there is a risk of harm
to a patient during an MRI if the patient has certain types of metal implants or cardiac pacemakers within his or her body. Although
patients are screened to safeguard against this risk, screening may nevertheless fail to identify the hazard. There also is potential
risk to patients treated with therapy equipment secondary to inadvertent or excessive over- or under- exposure to radiation. We
maintain professional liability insurance with coverage that we believe is consistent with industry practice and appropriate in
light of the risks attendant to our business. However, any claim made against us could be costly to defend against, resulting in
a substantial damage award against us and divert the attention of our management team from our operations, which could have an
adverse effect on our financial performance.

The healthcare regulatory and political framework is uncertain
and evolving.

Healthcare laws and regulations
may change significantly in the future which could adversely affect our financial condition and results of operations. We continuously
monitor these developments and modify our operations from time to time as the legislative and regulatory environment changes.

In March 2010, President
Barack Obama signed a healthcare reform measure, which provides healthcare insurance for approximately 30 million more Americans.
The Patient Protection and Affordable Care Act, as amended by the Healthcare and Education Affordability Reconciliation Act (collectively,
the “PPACA”), which includes a variety of healthcare reform provisions and requirements that will become effective
at varying times through 2018, substantially changes the way healthcare is financed by both governmental and private insurers,
including several payment reforms that establish payments to hospitals and physicians based in part on quality measures, and may
significantly impact our industry. The PPACA requires, among other things, payment rates for services using imaging equipment
that costs over $1 million to be calculated using revised equipment usage assumptions and reduced payment rates for imaging services
paid under the Medicare Part B fee schedule. While many of the provisions of the PPACA are scheduled to phase in over the course
of the next several years,we are unable to predict what effect the PPACA or other healthcare reform measures that may be adopted
in the future will have on our business, including those that may be proposed and/or enacted by the new Trump administration

The healthcare industry is highly regulated,
and government authorities may determine that we have failed to comply with applicable laws or regulations.

The healthcare industry
and physicians’ medical practices, including the healthcare and other services that we and our affiliated physicians provide,
are subject to extensive and complex federal, state and local laws and regulations, compliance with which imposes substantial costs
on us. Of particular importance are the provisions summarized as follows:

●

federal laws (including the federal False Claims Act) that prohibit entities and individuals from
knowingly or recklessly making claims to Medicare and other government programs that contain false or fraudulent information or
from improperly retaining known overpayments;

●

a provision of the Social Security Act, commonly referred to as the “anti-kickback”
law, that prohibits the knowing and willful offer, payment, solicitation or receipt of any bribe, kickback, rebate or other remuneration,
in cash or in kind, in return for the referral or recommendation of patients for items and services covered, in whole or in part,
by federal healthcare programs, such as Medicare;

●

a provision of the Social Security Act, commonly referred to as the Stark Law, that, subject to
limited exceptions, prohibits physicians from referring Medicare patients to an entity for the provision of certain “designated
health services” if the physician or a member of such physician’s immediate family has a direct or indirect financial
relationship (including a compensation arrangement) with the entity;

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●

similar state law provisions pertaining to anti-kickback, fee splitting, self-referral and false
claims issues, which typically are not limited to relationships involving federal payors;

●

provisions of HIPAA that prohibit knowingly and willfully executing a scheme or artifice to defraud
a healthcare benefit program or falsifying, concealing or covering up a material fact or making any material false, fictitious
or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services;

●

state laws that prohibit general business corporations from practicing medicine, controlling physicians’
medical decisions or engaging in certain practices, such as splitting fees with physicians;

●

federal and state laws that prohibit providers from billing and receiving payment from Medicare
and TRICARE for services unless the services are medically necessary, adequately and accurately documented and billed using codes
that accurately reflect the type and level of services rendered;

●

federal and state laws pertaining to the provision of services by non-physician practitioners,
such as advanced nurse practitioners, physician assistants and other clinical professionals, physician supervision of such services
and reimbursement requirements that may be dependent on the manner in which the services are provided and documented; and

●

federal laws that impose civil administrative sanctions for,
among other violations, inappropriate billing of services to federally funded healthcare programs, inappropriately reducing hospital
care lengths of stay for such patients, or employing individuals who are excluded from participation in federally funded healthcare
programs.

In addition, we believe that our business will
continue to be subject to increasing regulation, the scope and effect of which we cannot predict.

Federal and state laws that protect the
privacy and security of protected health information may increase our costs and limit our ability to collect and use that information
and subject us to penalties if we are unable to fully comply with such laws.

Numerous federal and state
laws and regulations govern the collection, dissemination, use, security and confidentiality of individually identifiable health
information. These laws include:

●

Provisions of HIPAA that limit how healthcare providers may use and disclose individually identifiable
health information, provide certain rights to individuals with respect to that information and impose certain security requirements;

●

HITECH, which strengthens and expands the HIPAA Privacy Standards and Security Standards;

●

Other federal and state laws restricting the use and protecting the privacy and security of protected
information, many of which are not preempted by HIPAA;

●

Federal and state consumer protection laws; and

●

Federal and state laws regulating the conduct of research with human subjects.

As part of our medical
record keeping, third-party billing, research and other services, we collect and maintain protected health information in paper
and electronic format. New protected health information standards, whether implemented pursuant to HIPAA, HITECH, congressional
action or otherwise, could have a significant effect on the manner in which we handle healthcare-related data and communicate with
payors, and compliance with these standards could impose significant costs on us or limit our ability to offer services, thereby
negatively impacting the business opportunities available to us.

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If we do not comply with
existing or new laws and regulations related to protected health information we could be subject to remedies that include monetary
fines, civil or administrative penalties or criminal sanctions.

Changes in the rates or methods of third-party
reimbursements for medical services could result in reduced demand for our services or create downward pricing pressure, which
would result in a decline in our revenues and harm to our financial position.

Third-party payors such
as Medicare, TRICARE and commercial health insurance companies, may change the rates or methods of reimbursement for the services
we currently provide or plan to provide and such changes could have a significant negative impact on those revenues. At this time,
we cannot predict the impact that rate reductions will have on our future revenues or business. Moreover, patients on whom we currently
depend, and expect to continue to depend on, for the majority of our medical clinic revenues generally rely on reimbursement from
third-party payors for the payment of medical services. If our patients begin to receive decreased reimbursement from third-party
payors for their medical services and as such are forced to pay for the remainder of their medical services out of pocket, then
a reduced demand for our services or downward pricing pressures could result, which could have a material impact on our financial
position.

Future
requirements limiting access to or payment for medical services may negatively impact our future revenues or business. If legislation
substantially changes the way healthcare is reimbursed by both governmental and commercial insurance carriers, it may negatively
impact payment rates for certain medical services. We cannot predict at this time whether or the extent to which other proposed
changes will be adopted, if any, or how these or future changes will affect the demand for our services.

Managed care organizations may prevent
their members from using our services which would cause us to lose current and prospective patients.

Healthcare providers participating
as providers under managed care plans may be required to refer medical services to specific medical clinics depending on the plan
in which each covered patient is enrolled. These requirements may inhibit their members from using our medical services in some
cases. The proliferation of managed care may prevent an increasing number of their members from using our services in the future
which would cause our revenues to decline.

We may need to restructure
our services and practices if our methods are determined not to comply with the Stark Law.

The
Ethics in Patient Referral Act of 1989, as amended (the “Stark Law”), is a civil statute that generally (i) prohibits
physicians from making referrals for designated health services to entities in which the physicians have a direct or indirect financial
relationship and (ii) prohibits entities from presenting or causing to be presented claims or bills to any individual, third-party
payor, or other entity for designated health services furnished pursuant to a prohibited referral. Under the Stark Law, a physician
may not refer patients for certain designated health services to entities with which the physician has a direct or indirect financial
relationship, unless allowed under an enumerated exception. Under the Stark Law, there are numerous statutory and regulatory exceptions
for certain otherwise prohibited financial relationships. A transaction must fall entirely within an exception to be lawful under
the Stark Law.

We
believe that any referrals between or among our Company, the physicians providing services and the facilities where procedures
are performed will be for services compliant under the Stark Law. If these arrangements are found to violate the Stark Law, we
may be required to restructure such services or be subject to civil or criminal fines and penalties, including the exclusion of
our Company, the physicians, and the facilities from the Medicare programs, any of which events could have a material adverse effect
on our business, financial condition and results of operations.

Some states have enacted
statutes, similar to the federal Anti-Kickback Statute and Stark Law, applicable to our operations because they cover all referrals
of patients regardless of the payer or type of healthcare service provided. These state laws vary significantly in their scope
and penalties for violations. Although we have endeavored to structure our business operations to be in material compliance with
such state laws, authorities in those states could determine that our business practices are in violation of their laws, which
would have a material adverse effect on our business, financial condition and results of operations.

20

We are subject to federal and state restrictions on advertising
that may adversely affect our ability to advertise our Centers and services.

The growth of our healthcare
business is dependent on advertising, which is subject to regulation by the Federal Trade Commission (“FTC”). We believe
that we have structured our advertising practices to be in material compliance with FTC regulations and guidance. However, we cannot
be certain that the FTC will not determine that our advertising practices are in violation of such laws and guidance.

In addition, the laws of
many states restrict certain advertising practices by and on behalf of physicians. Many states do not offer clear guidance on the
bounds of acceptable advertising practices or on the limits of advertising provided by management companies on behalf of physicians.
Although we have endeavored to structure our advertising practices to be in material compliance with such state laws, authorities
in those states could determine that our advertising practices are in violation of those laws.

Our Company and our physicians
are covered entities under HIPAA if we or our physicians provide services that are reimbursable under Medicare or other third-party
payors (e.g., orthopedic services). Although the covered healthcare providers themselves are primarily liable for HIPAA compliance,
as a “business associate” to these covered entities we are bound indirectly to comply with the HIPAA privacy regulations,
and we are directly bound to comply with certain of the HIPAA security regulations. Although we cannot predict the total financial
or other impact of these privacy and security regulations on our business, compliance with these regulations could require us to
incur substantial expenses, which could have a material adverse effect on our business, financial condition and results of operations.
In addition, we will continue to remain subject to any state laws that are more restrictive than the privacy regulations issued
under the Administrative Simplification Provisions.

If technological changes occur rendering
our equipment or services obsolete, or increase our cost structure, we may need to make significant capital expenditures or modify
our business model, which could cause our revenues or results of operations to decline.

Industry competitive or
clinical factors, among others, may require us to introduce alternate medical technology for the services and procedures we offer
than those that may currently be in use in our medical multi-specialty Centers. Introducing such technology could require significant
capital investment or force us to modify our business model in such a way as to make our revenues or results of operations decline.
An increase in costs could reduce our ability to maintain our margins. An increase in prices could adversely affect our ability
to attract new patients. If we are unable to obtain or maintain state of the art equipment that is essential to the professional
medical services provided by our clinics, our business, prospects, results of operations and financial condition could be materially
and adversely affected.

We rely significantly on information
technology and any failure, inadequacy, interruption or security lapse of that technology, including any cybersecurity incidents,
could harm our ability to operate our business effectively.

Our
internal computer systems and those of third parties with which we contract may be vulnerable to damage from cyber-attacks, computer
viruses, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures despite the implementation
of security measures. System failures, accidents or security breaches could cause interruptions in our operations, and could result
in a material disruption of our business operations, in addition to possibly requiring substantial expenditures of resources to
remedy. To the extent that any disruption or security breach were to result in a loss of, or damage to, our data or applications,
or inappropriate disclosure of confidential or proprietary information, we could incur liability and our collections from third-party
payors could be delayed.

21

If we are forced to lower our procedure
prices in order to compete with a better-financed or lower-cost provider of medical healthcare services, our medical revenues and
results of operations could decline.

Our current and future
multi-specialty Medical Centers of Excellence will compete with medical clinics and other technologies currently under development.
Presently we compete with other clinics and from hospitals, hospital-affiliated group entities and physician group practices.

Some of our current competitors,
or other companies which may choose to enter the industry in the future, may have substantially greater financial, technical, managerial,
marketing or other resources and experience than we do and may be able to compete more effectively. Similarly, competition could
increase if the market for healthcare services does not experience growth, and existing providers compete for market share. Additional
competition may develop, particularly if the price for services or reimbursement decreases. Our management, operations, strategy
and marketing plans may not be successful in meeting this competition.

If more competitors begin
to offer healthcare services in our geographic markets, we might find it necessary to reduce the prices we charge, particularly
if competitors offer the services at lower prices than we do. If that were to happen or we were not successful in cost effectively
acquiring patients for our procedures, we may not be able to make up for the reduced gross profit margin by increasing the number
of procedures that we perform, and our business, financial condition and results from operations could be adversely affected.

A decline in consumer disposable income
could adversely affect the number of procedures performed which could have a negative impact on our financial results.

After
payments by commercial healthcare insurance companies or government programs, including Medicare and TRICARE, the remaining portion
of the cost of medical care is paid by the patient. Some of our patients may not have the financial resources to pay for the services
they receive at our Medical Centers of Excellence, or services they may receive at our future Centers, which are ultimately not
reimbursed by their healthcare provider. Accordingly, our operating results may vary based upon the impact of changes in the disposable
income of patients using our services, among other economic factors. A significant decrease in consumer disposable income in a
weak economy may result in a decrease in the number of elective medical procedures performed by our current and future Centers,
and a related decline in our revenues and profitability. In addition, weak economic conditions may cause some of our patients to
experience financial distress or declare bankruptcy, which may negatively impact our accounts receivable and collection experience.

RISKS RELATED TO OUR COMMON STOCK.

There has been a limited trading market for our Common Stock
to date.

While our Common Stock
is currently quoted on OTC Markets, Inc., the trading volume is limited. We are quoted on the OTCQB under the trading symbol “FCHS.”
It is anticipated that there will continue to be a limited trading market for our Common Stock on the OTCQB. A lack of an active
market may impair your ability to sell your shares at the time you wish to sell them or at a price that you consider reasonable.
The lack of an active market may also reduce the fair market value of your shares. An inactive market may also impair our ability
to raise capital by selling shares of capital stock and may impair our ability to acquire other companies or technologies by using
Common Stock as consideration.

You may have difficulty trading and obtaining quotations for
our Common Stock.

Our Common Stock may not
be actively traded, and the bid and ask prices for our Common Stock on the OTCQB, as our Common Stock is currently quoted, may
fluctuate widely. As a result, investors may find it difficult to dispose of, or to obtain accurate quotations of the price of,
our securities. This severely limits the liquidity of the Common Stock, and would likely reduce the market price of our Common
Stock and hamper our ability to raise additional capital.

The market price for our Common Stock
may be volatile, and your investment in our Common Stock could decline in value.

The stock market in general
has experienced extreme price and volume fluctuations. The market prices of the securities of healthcare services companies have
been highly historically volatile and may be highly volatile in the future. This volatility has often been unrelated to the operating
performance of particular companies. The following factors, in addition to other risk factors described in this section, may have
a significant impact on the market price of our Common Stock:

22

●

changes in government regulation of the medical industry;

●

changes in reimbursement policies of third-party insurance
companies, self-insured companies or government agencies;

●

actual or anticipated fluctuations in our operating results;

●

changes in financial estimates or recommendations by securities analysts;

●

developments involving corporate collaborators, if any;

●

changes in accounting principles; and

●

the loss of any of our key physicians or management personnel.

In
the past, securities class action litigation has often been brought against companies that experience volatility in the market
price of their securities. Whether or not meritorious, litigation brought against us could result in substantial costs and a diversion
of management’s attention and resources, which could adversely affect our business, operating results and financial condition.

We have not paid dividends in the past and have no immediate
plans to pay dividends.

We plan to reinvest all
of our earning, to the extent we have earnings, in order to grow, market our services and cover operating costs and to otherwise
become and remain competitive. We do not plan to pay any cash dividends with respect to our securities in the foreseeable future.
We cannot assure you that we would, at any time, generate sufficient surplus cash that would be available for distribution to the
holders of our Common Stock as a dividend. Therefore, you should not expect to receive cash dividends on our Common Stock.

We expect that our quarterly results
of operations will fluctuate, and this fluctuation could cause our stock price to decline.

Our quarterly operating
results are likely to fluctuate in the future. These fluctuations could cause our stock price to decline. The nature of our business
involves variable factors, such as the timing of the research, development and regulatory pathways of our product candidates, which
could cause our operating results to fluctuate. Due to the possibility of fluctuations in our revenues and expenses, we believe
that quarter-to-quarter comparisons of our operating results are not a good indication of our future performance.

“Penny stock” rules may make
buying or selling our securities difficult which may make our stock less liquid and make it harder for investors to buy and sell
our securities.

Trading in our securities
is subject to the SEC’s “penny stock” rules and it is anticipated that trading in our securities will continue
to be subject to the penny stock rules for the foreseeable future. The SEC has adopted regulations that generally define a penny
stock to be any equity security that has a market price of less than $5.00 per share, subject to certain exceptions. These rules
require that any broker-dealer who recommends our securities to persons other than prior customers and accredited investors must,
prior to the sale, make a special written suitability determination for the purchaser and receive the purchaser’s written
agreement to execute the transaction. Unless an exception is available, the regulations require the delivery, prior to any transaction
involving a penny stock, of a disclosure schedule explaining the penny stock market and the risks associated with trading in the
penny stock market. In addition, broker-dealers must disclose commissions payable to both the broker-dealer and the registered
representative and current quotations for the securities they offer. The additional burdens imposed upon broker-dealers by these
requirements may discourage broker-dealers from recommending transactions in our securities, which could severely limit the liquidity
of our securities and consequently adversely affect the market price for our securities.

23

Our current directors and officers hold
significant control over our Common Stock and they may be able to control our Company indefinitely.

Our current directors and
officers currently have beneficial ownership of approximately 32%of our outstanding Common Stock. These significant stockholders
therefore have considerable influence over the outcome of all matters submitted to our stockholders for approval, including the
election of directors, the approval of significant corporate transactions.

Our charter documents and Delaware law may inhibit a takeover
that stockholders consider favorable.

Provisions of our Certificate
of Incorporation (“Certificate”) and bylaws and applicable provisions of Delaware law may delay or discourage transactions
involving an actual or potential change in control or change in our management, including transactions in which stockholders might
otherwise receive a premium for their shares, or transactions that our stockholders might otherwise deem to be in their best interests.
The provisions in our Certificate and bylaws:

●

limit who may call stockholder meetings;

●

do not provide for cumulative voting rights; and

●

provide that all vacancies may be filled by the affirmative vote of a majority of directors then
in office, even if less than a quorum.

In
addition, Section 203 of the Delaware General Corporation Law may limit our ability to engage in any business combination with
a person who beneficially owns 15% or more of our outstanding voting stock unless certain conditions are satisfied. The restriction
lasts for a period of three years following the share acquisition. These provisions may have the effect of entrenching our management
team and may deprive you of the opportunity to sell your shares to potential acquirers at a premium over prevailing prices. The
potential inability to obtain a control premium could reduce the price of our Common Stock.

Failure to achieve
and maintain internal controls in accordance with Sections 302 and 404 of the Sarbanes-Oxley Act of 2002 could have a material
adverse effect on our business and stock price.

If we fail to maintain
adequate internal controls or fail to implement required new or improved controls, as we grow or as such control standards are
modified, supplemented or amended from time to time; we may not be able to assert that we can conclude on an ongoing basis that
we have effective internal controls over financial reporting. Effective internal controls are necessary for us to produce reliable
financial reports and are important in the prevention of financial fraud. If we cannot produce reliable financial reports or prevent
fraud, our business and operating results could be harmed, investors could lose confidence in our reported financial information,
and there could be a material adverse effect on our stock price.

ITEM 2.

PROPERTIES

We maintain our principal
office at 709 S. Harbor City Boulevard, Suite 530, Melbourne, Florida, 32901. Our current office space, including the space that
occupies First Choice Medical Group’s (“FCMG”) medical operations, consists of 39,666 square feet spanning four
floors in Marina Towers. Until its sale in March 2016, Marina Towers was owned by Marina Towers, LLC, a subsidiary owned
by FCID Holdings, Inc. (99%) and MTMC of Melbourne, Inc. (1%), both wholly owned subsidiaries of our Company until their dissolution
in September 2016. At that time, Marina Towers, LLC became a wholly owned subsidiary of First Choice Healthcare Solutions,
Inc.

On March 31, 2016, we sold
Marina Towers, a 78,000 square-foot medical office building, for a purchase price of $15.45 million to Global Medical REIT Inc.
The sale included the site and building, an easement on the adjacent property to the north for surface parking, all tenant leases,
and above and below ground garages.

24

The entire facility was
leased back to Marina Towers, LLC via a 10-year absolute triple-net master lease agreement that expires
in 2026. We have two successive options to renew the lease for five-year periods on the same terms and conditions as the primary
non-revocable lease term with the exception of rent, which will be adjusted to the prevailing fair market rent at renewal and will
escalate in successive years during the extended lease period.

In addition, TBC subleases
29,629 square feet of commercial office space to affiliated and non-affiliated tenants, including 18,828 square feet to Crane
Creek Surgery Center (“CCSC”), located at 2222 South Harbor City Boulevard, Melbourne, Florida 32901, which is also
TBC’s main medical practice location. TBC also sees patients at its satellite office located at 650 S. Courtenay Parkway,
Merritt Island, Florida 32952.

Crane Creek Surgery Center
is located in the same building as TBC at 222 South Harbor City Boulevard, Suite 540, Melbourne, Florida 32901.

We believe that our existing
facilities are suitable and adequate to meet our current business requirements.

ITEM 3.

LEGAL PROCEEDINGS

From time to
time, we may become involved in lawsuits and legal proceedings which arise in the ordinary course of business, including potential
disputes with patients. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters
may arise from time to time that may harm our business. Our contracts with hospitals generally requires us to indemnify them and
their affiliates for losses resulting from the negligence of our physicians. Currently, we have no pending litigation that is
deemed to be material.

Although we
currently maintain liability insurance coverage intended to cover professional liability and certain other claims, we cannot assure
that our insurance coverage will be adequate to cover liabilities arising out of claims asserted against us in the future where
the outcomes of such claims are unfavorable to us. Liabilities in excess of our insurance coverage, including coverage for professional
liability and certain other claims, could have a material adverse effect on our business, financial condition and results of operations.

The B.A.C.K.
Center (“TBC”) has had a claim filed in Brevard County, Florida Circuit Court against Health First Management, Inc.
(“Health First”) due to a contract dispute that predates our Company’s involvement with TBC. The dispute is
currently in advanced settlement discussions. Irrespective of the settlement outcome, our Company will not receive any settlement
fees nor will we be subject to paying any settlement fees.

Our Common Stock is currently
quoted under the symbol “FCHS” on the OTCQB, the OTC market tier for companies that report to the SEC.

The following table sets
forth, for the period indicated, the quarterly high and low per share sales prices (per share of our Common Stock for each quarter
during our last two fiscal years as reported by OTCQB):

2016

High

Low

First Quarter

$

1.05

$

0.83

Second Quarter

$

1.20

$

0.85

Third Quarter

$

1.27

$

1.05

Fourth Quarter

$

1.60

$

1.07

2015

High

Low

First Quarter

$

1.20

$

0.80

Second Quarter

$

1.48

$

1.01

Third Quarter

$

1.39

$

1.03

Fourth Quarter

$

1.38

$

0.76

The above information was obtained from Nasdaq.com.
Because these are over-the-counter market quotations, these quotations reflect inter-dealer prices, without retail mark-up, markdown
or commissions and may not represent actual transactions. There is currently no public trading market for our preferred stock.

As of March 30, 2017,
we had 147 individual shareholders of record of our Common Stock, and the closing sales price on that date for our Common Stock
was $1.47 per share. We believe that the number of beneficial owners of our Common Stock is greater than the number of record
holders, because a number of shares of our Common Stock is held through brokerage firms in “street name.” We
estimate that the total number of beneficial owners of our Common Stock, including shareholders of record, is approximately
600 individuals.

Dividend Policy

We have never
declared or paid any cash dividends on our shares of Common Stock. Under Delaware law, we may declare and pay dividends on
our capital stock either out of our surplus, as defined in the relevant Delaware statutes, or if there is no such
surplus, out of our net profits for the fiscal year in which the dividend is declared and/or the preceding fiscal year. If,
however, the capital of our company, computed in accordance with the relevant Delaware statutes, has been diminished by
depreciation in the value of our property, or by losses, or otherwise, to an amount less than the aggregate amount of the
capital represented by the issued and outstanding stock of all classes having a preference upon the distribution of assets,
we are prohibited from declaring and paying out of such net profits and dividends upon any shares of our capital stock until
the deficiency in the amount of capital represented by the issued and outstanding stock of all classes having a preference
upon the distribution of assets shall have been repaired. We do not intend to declare or pay any cash dividends on our
Common Stock in the foreseeable future. The holders of our Common Stock are entitled to receive only such dividends (cash
or otherwise) as may be declared by our Company’s Board of Directors.

On June 13, 2013, our
wholly owned subsidiary, First Choice – Brevard, entered into a loan and security agreement (the “Loan Agreement”)
with C.T. Capital, Ltd., d/b/a C.T. Capital, LP, a Florida limited liability partnership (the “Lender”).
Under the Loan Agreement, as subsequently modified (the “Modification Agreement”), the Lender committed to make an
accounts receivable line of credit of $2.5 million available to First Choice – Brevard. In December 2016,the Lender converted
$1.4 million in obligations due under the Modification Agreement into 1,866,667 shares of our Common Stock at a conversion price
of $0.75 per share. At December 31, 2016, the Company was obligated, but had not yet issued the 1,866,667 shares of our Common
Stock.

On March 30, 2017, the
Company’s Loan and Security Agreement with C.T. Capital, Ltd. (“Lender”) was amended to extend the Maturity
Date to June 30, 2018 (the “Loan”) and further provide that neither the Company nor Lender shall effectuate any conversion
of the Loan to the extent that after giving effect to any such conversion, the Lender would beneficially own in excess of 9.99%
of the number of shares of our Company’s shares of Common Stock outstanding immediately after giving effect to the issuance
of shares of Common Stock issuable upon conversion of the Loan by the Lender.

Other Common Stock
Issuances

During the year ended
December 31, 2016, we issued an aggregate of 1,634,071 shares of our Common Stock to officers, employees and service providers
at an aggregate fair value of $1,462,486, of which $573,900 was expensed in 2015.

During the year ended December
31, 2016, we issued an aggregate of 129,630 shares of our Common Stock in connection with settlement of a stock subscription from
2015 at an aggregate fair value of $175,000.

We were obligated to issue
our Common Stock to officers and consultants for past and future services as of December 31, 2016. The estimated liability as of
December 31, 2016 of $469,096 ($1.00 per share) was determined based on services rendered. The shares were issued in reliance upon
the exemption from registration under Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”).

ITEM 6.

SELECTED FINANCIAL DATA

This item is not required
for Smaller Reporting Companies.

ITEM 7.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

The
following discussion highlights the principal factors that have affected our financial condition and results of operations, as
well as our liquidity and capital resources for the periods described. This discussion should be read in conjunction with our Consolidated
Financial Statements and the related notes included in Item 8 of this Form 10-K. This discussion contains forward-looking statements.
Please see the explanatory note concerning “Forward-Looking Statements” in Part I of this Annual Report on Form 10-K
and Item 1A. Risk Factors for a discussion of the uncertainties, risks and assumptions associated with these forward-looking statements.
The operating results for the periods presented were not significantly affected by inflation.

Overview

Critical Accounting Policies

Basis of Accounting

Our financial statements
are prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”).
The preparation of these financial statements requires our management to make estimates and assumptions about future events that
affect the amounts reported in the financial statements and related notes. Future events and their effects cannot be determined
with absolute certainty. Therefore, the determination of estimates requires the exercise of judgment. We believe the following
critical accounting policies affect its more significant judgments and estimates used in the preparation of financial statements.

27

Revenue Recognition

We
recognize revenue in accordance with Accounting Standards Codification subtopic 605-10, “Revenue Recognition”
(“ASC 605-10”), which requires that four basic criteria be met before revenue can be recognized: (1) persuasive evidence
of an arrangement exists; (2) delivery has occurred; (3) the selling price is fixed or determinable; and (4) collectability is
reasonably assured. Determination of criteria (3) and (4) are based on management’s judgments regarding the fixed nature
of the selling prices of the products delivered and the collectability of those amounts. Provisions for discounts and rebates
to customers, estimated returns and allowances, and other adjustments are provided for in the same period the related sales are
recorded.

ASC 605-10 incorporates
Accounting Standards Codification subtopic 605-25, “Multiple-Element Arrangements” (“ASC 605-25”).
ASC 605-25 addresses accounting for arrangements that may involve the delivery or performance of multiple products, services and/or
rights to use assets. The effect of implementing ASC 605-25 on our financial position and results of operations was not significant.

In accordance with Accounting
Standards Codification subtopic 954-310, “Health Care Entities” (“ASC 954-310”), we recognize patient service
revenue at the time the services are rendered, even though we do not assess the patient’s ability to pay. Therefore, our
interim and annual period reports disclose our policy for assessing and disclosing the timing and amount of uncollectable patient
service revenue recognized as doubtful. Qualitative and quantitative information about significant changes in the allowance for
doubtful accounts related to patient accounts receivable are disclosed in our Company’s reports. These estimates are based
upon the past history and identified trends for each of our payers.

Patient Service Revenue

We
recognize patient service revenue associated with services provided to patients who have third-party payer coverage on the basis
of contractual rates for the services provided. For uninsured or self-pay patients that do not qualify for charity care, we recognize
revenue on the basis of our standard rates for services provided (or on the basis of discounted rates, if negotiated or provided
by policy). On the basis of historical experience, a portion of our patient service revenue may be potentially uncollectible
due to patients who are unable or unwilling to pay for the services provided or the portion of their bill for which they are responsible.
Thus, we record a provision for bad debts related to potentially uncollectible patient service revenue in the period the services
are provided.

Rental Revenue

Up until its sale
and leaseback on March 31, 2016, Marina Towers, a 78,000 square foot, Class A, six-story building located on the Indian River
in Melbourne, Florida, was owned by our wholly owned subsidiaries, FCID Holdings, Inc. (“FCID Holdings”), which
held 99% ownership, and MTMC of Melbourne, Inc., which held 1% ownership. On March 31, 2016, we completed the sale of Marina
Towers to Global Medical REIT Inc. for a purchase price of $15.45 million. In addition, our wholly owned subsidiary, Marina
Towers, LLC, leased back the entire facility via a 10-year absolute triple-net master lease agreement that will expire in
2026 and be renewable for two five-year periods on the same terms and conditions as the primary lease term with the exception
of rent, which will be adjusted to the prevailing market rent at renewal and will escalate in successive years during the
extended lease period. In September 2016, both FCID Holdings and MTMC of Melbourne were dissolved and Marina Towers, LLC
became wholly owned by First Choice Healthcare Solutions, Inc. Marina Towers subleases 38,334
square feet of commercial office space to nonaffiliated tenants.

In addition, The B.A.C.K.
Center (“TBC”) subleases 29,629 square feet of commercial office space to affiliated and nonaffiliated tenants, including
18,828 square feet to Crane Creek Surgery Center (“CCSC”), located at 2222 South Harbor City Boulevard, Melbourne,
Florida 32901, which is also TBC’s main medical practice location.

28

Variable Interest Entities

The B.A.C.K. Center

Effective May 1, 2015,
the Company, through its wholly owned subsidiary, TBC Holdings of Melbourne, Inc., entered into an Operating and Control Agreement
(the Agreement”) with Brevard Orthopaedic Spine & Pain Clinic, Inc. (“The B.A.C.K. Center”), whereby we
have sole and exclusive management and control of The B.A.C.K. Center, including, but not limited to, administrative, financial,
facility and business operations including the requirement to absorb losses or right to receive economic benefits. We issued 3,000,000
options to purchase our Company’s Common Stock at $1.35 per share with vesting contingent on The B.A.C.K. Center employees
signing employment contracts with First Choice - Brevard. The initial term of the Agreement relating to the options expired on
December 31, 2016, with the Company having the right to extend the term until December 31, 2023. We exercised our option to extend
the term until December 31, 2017.

We have determined that
The B.A.C.K. Center is a Variable Interest Entity (“VIE”) in accordance with Financial Accounting Standards Board
(“FASB”) and Accounting Standards Codification (“ASC”) Topic 810, “Consolidation.”
In evaluating whether our Company has the power to direct the activities of a VIE that most significantly impact its economic
performance, we have consider the purpose for which the VIE was created, the importance of each of the activities in which it
is engaged and our Company’s decision-making role, if any, in those activities that significantly determine the entity’s
economic performance as compared to other economic interest holders. This evaluation requires consideration of all facts and circumstances
relevant to decision-making that affects the entity’s future performance and the exercise of professional judgment in deciding
which decision-making rights are most important.

In determining whether
our Company has the right to receive benefits or the obligation to absorb losses that could potentially be significant to the
VIE, we evaluate all of our economic interests in the entity, regardless of form (debt, equity, management and servicing
fees, and other contractual arrangements). This evaluation considers all relevant factors of the entity’s structure, including:
the entity’s capital structure, contractual rights to earnings (losses), subordination of our interests relative to those
of other investors, contingent payments, as well as other contractual arrangements that have potential to be economically significant.
The evaluation of each of these factors in reaching a conclusion about the potential significance of our economic interests is
a matter that requires the exercise of professional judgment.

The collective ownership
of Crane Creek is comprised of CCSC Holdings, CCSC TBC Group, LLC (“TBC Group”), which is owned by Richard Hynes,
M.D., FASC and Devin Datta, M.D.; and Blue Chip Crane Creek Investments, LLC, owned by NueHealth, LLC, who develops and manages
world class ambulatory surgery centers and specialty hospitals across the United States. Drs. Hynes and Datta are both affiliated
with The B.A.C.K. Center, a First Choice medical center of excellence in Melbourne, Florida.

Together,
CCSC Holdings and TBC Group own 75% interest in Crane Creek. In accordance with the Crane Creek Restated and Amended Operating
Agreement, CCSC Holdings will exercise sufficient control over the business of Crane Creek that will allow us to treat it as a
variable interest entity effective October 1, 2015. We have the power to make decisions that most significantly affect the
economic performance of Crane Creek and to absorb significant losses or right to receive benefits that could potentially be significant.
As a result, we include the financial results of the VIE in our consolidated financial statements in accordance with generally
accepted accounting principles.

29

Of the $560,000 cash consideration
paid, CCSC Holdings borrowed $420,000 pursuant to a promissory note which bore interest at 8% per annum and matured on April 15,
2016 (the “Note”). The Note was paid in full on April 15, 2016.

Derivative Financial Instruments

Accounting Standards Codification
subtopic 815-40, Derivatives and fledging, Contracts in Entity’s own Equity (“ASC 815-40”) became effective for
our Company on October 1, 2009. Our convertible debt has conversion provisions based on a discount the market price of our Common
Stock.

Stock-Based Compensation

Share-based
compensation issued to employees is measured at the grant date, based on the fair value of the award, and is recognized as an expense
over the requisite service period. We measure the fair value of the share-based compensation issued to non-employees using the
stock price observed in the arms-length private placement transaction nearest the measurement date (for stock transactions) or
the fair value of the award (for non-stock transactions), which were considered to be more reliably determinable measures of fair
value than the value of the services being rendered. The measurement date is the earlier of (1) the date at which commitment for
performance by the counterparty to earn the equity instruments is reached, or (2) the date at which the counterparty’s performance
is complete.

Income Tax

We account for income taxes
pursuant to Accounting Standards Codified 740 (“ASC 740”). Under ASC 740 deferred taxes are provided on a liability
method whereby deferred tax assets are recognized for deductible temporary differences and operating loss carry forwards and deferred
tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported
amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion
of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax
assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

Results of Operations

Year Ended December 31, 2016 as Compared to Year Ended December
31, 2015

The following is a discussion
of the results of operations for the year ended December 31, 2016 compared to the year ended December 31, 2015.

Revenues

Total revenue was $29,464,082
for the 12 months ended December 31, 2016, rising 51% from $19,517,664 in the prior year. Net patient service revenue, less provision
for bad debts of $924,916, accounted for $27,053,190 of total revenue in 2016, and rental revenue was $2,410,892. This compared
to net patient service revenue of $17,770,697 and rental revenue of $1,746,967 for the 12 months ended December 31, 2015. The increase
in total revenue was largely attributable to the revenue contributions of The B.A.C.K. Center and Crane Creek Surgery Center, which
were VIE transactions that became effective May 1, 2015 and October 1, 2015, respectively.

30

Operating Expenses

Operating expenses include
the following:

Year Ended
12/31/2016

Year Ended 12/31/2015

Salaries and benefits

$

12,570,398

$

9,337,740

Other operating expenses

5,912,655

2,099,568

General and administrative

10,019,667

7,144,538

Litigation settlement

—

2,017,208

Depreciation and amortization

821,709

852,985

Total operating expenses

$

29,324,429

$

21,452,039

The major components
of operating expenses in 2016 included practice salaries and benefits, practice supplies and other operating costs; depreciation
and amortization; and general and administrative expenses, which included legal, accounting and professional fees associated with
being a public entity. The 37% increase in total operating expenses was due to the addition of The B.A.C.K. Center and Crane
Creek Surgery Center to our Melbourne Platform, effective May 1, 2015 and October 1, 2015, respectively, as well as the hiring
of additional care providers in 2016. In 2015, operating expenses were also impacted by costs relating to the MedTRX legal settlement,
which compared to zero litigation settlement expense in 2016.

Net Income (Loss) on Operations

Net
income from operations for the year ended December 31, 2016 totaled $139,653, which compared to a loss from operations of
$1,934,375 for the prior year.

Gain on Sale of Property and Improvements

In connection with the
sale and leaseback of Marina Towers in March 2016, we recognized a one-time gain on sale of property and improvements totaling
$9,188,968. In addition, we sold equipment for a net gain of $18,878. The total gain on sale of property and improvements in 2016
was $9,207,846.

Interest Expense

Interest expense declined
72% to $343,161 for the year ended December 31, 2016, which compared to interest expense of $1,220,980 for the year ended December 31,
2015. The decrease was largely due to the payoff of our Marina Towers mortgage in March 2016 and conversions of our convertible
notes payable to Hillair Capital Investments, LP in 2015.

Net Income (Loss)

As a result of all the
above, net income for the 12 months ended December 31, 2016 totaled $9,267,042, which compared to a net loss of $3,204,165 reported
for the prior year, ended December 31, 2015.

31

Segment Results

We report segment information
based on the “management” approach. The management approach designates the internal reporting used by management for
making decisions and assessing performance as the source of our reportable segments. The following are the revenues, operating
expenses and net income (loss) by segment for the years ended December 31, 2016 and December 31, 2015. The significant fluctuations
in the line items are described above.

Summary Statement of Operations for the year
ended December 31, 2016:

The

FCID

B.A.C.K.

Intercompany

Medical

Center

CCSC

Corporate

Eliminations

Total

Revenue:

Net patient service revenue

$

9,357,077

$

12,619,389

$

5,076,724

$

—

$

—

$

27,053,190

Rental revenue

—

1,403,215

1,739,646

(731,969

)

2,410,892

Total revenue

9,357,077

14,022,604

5,076,724

1,739,646

(731,969

)

29,464,082

Operating expenses:

Salaries & benefits

3,487,594

6,588,842

1,219,749

1,274,213

—

12,570,398

Other operating expenses

2,175,409

—

3,123,964

1,345,251

(731,969

)

5,912,655

General and administrative

1,579,283

6,231,741

491,678

1,716,965

—

10,019,667

Depreciation and amortization

272,968

24,451

112,595

411,695

—

821,709

Total operating expenses

7,515,254

12,845,034

4,947,986

4,748,124

(731,969

)

29,324,429

Net income (loss) from operations:

1,841,823

1,177,570

128,738

(3,008,478

)

—

139,653

Interest income (expense)

(216,149

)

(13,397

)

(10,087

)

(103,528

)

—

(343,161

)

Amortization of financing costs

—

(1,317

)

—

(14,337

)

—

(15,654

)

Gain on sale of property

—

—

18,878

9,188,968

—

9,207,846

Other income (expense)

—

268,543

6,815

3,000

—

278,358

Net income before income taxes:

1,625,674

1,431,399

144,344

6,065,625

—

9,267,042

Income taxes

—

—

—

—

Net income

1,625,674

1,431,399

144,344

6,065,625

—

9,267,042

Non-controlling interest

—

—

(92,659

)

—

—

(92,659

)

Net income attributable to First Choice Healthcare Solutions

$

1,625,674

$

1,431,399

$

51,685

$

6,065,625

$

—

$

9,174,383

32

Summary Statement of Operations for the year ended December 31,
2015:

The

FCID

B.A.C.K.

Intercompany

Medical

Center

CCSC

Corporate

Eliminations

Total

Revenue:

Net patient service revenue

$

7,537,761

$

9,108,139

$

1,124,797

$

—

$

—

$

17,770,697

Rental revenue

—

681,227

1,558,083

(492,343

)

1,746,967

Total revenue

7,537,761

9,789,366

1,124,797

1,558,083

(492,343

)

19,517,664

Operating expenses:

Salaries & benefits

3,421,210

4,084,312

311,450

1,520,768

—

9,337,740

Other operating expenses

1,861,195

—

287,349

443,367

(492,343

)

2,099,568

General and administrative

1,246,383

3,738,436

111,009

2,048,710

—

7,144,538

Litigation settlement

401,958

—

—

1,615,250

—

2,017,208

Depreciation and amortization

266,025

18,404

55,749

512,807

—

852,985

Total operating expenses

7,196,771

7,841,152

765,557

6,140,902

(492,343

)

21,452,039

Net income (loss) from operations:

340,990

1,948,214

359,240

(4,582,819

)

—

(1,934,375

)

Interest income (expense)

(243,531

)

(20,621

)

(10,545

)

(946,283

)

—

(1,220,980

)

Amortization of financing costs

(10,582

)

(7,903

)

—

(57,348

)

—

(75,833

)

Other income (expense)

—

—

3,554

23,469

—

27,023

Net income (loss) before income taxes:

86,877

1,919,690

352,249

(5,562,981

)

—

(3,204,165

)

Income taxes

—

—

—

—

Net income (loss)

86,877

1,919,690

352,249

(5,562,981

)

—

(3,204,165

)

Non-controlling interest

—

—

(217,676

)

—

—

(217,676

)

Net income (loss) attributable to First Choice Healthcare Solutions

$

86,877

$

1,919,690

$

134,573

$

(5,562,981

)

$

—

$

(3,421,841

)

Liquidity and Capital Resources

As
of December 31, 2016, we had cash of $4,593,638 and accounts receivable totaling $9,536,830. This compared to cash of $1,594,998,
restricted cash of $359,414 and accounts receivable of $6,623,894 as of the end of 2015.

33

For
the 12 months ended December 31, 2016, net cash used in our operating activities totaled $3,506,359 as compared to net cash provided
by our operating activities of $483,930 in the prior year.

Net cash provided from
our investing activities increased to $14,858,870 in 2016, compared to net cash provided by our investing activities of $88,912
in 2015. The 166% increase was largely attributable to the sale and leaseback of Marina Towers, which occurred in March 2016, offset
by the purchase of certain medical equipment.

Net
cash used in our financing activities in 2016 totaled $8,353,871, which compared to net cash provided by our
financing activities of $743,069 in the previous year. The cash flows used in our financing activities were primarily related
to the use of proceeds from the sale of Marina Towers to pay notes payable and repurchase previously issued
warrants.

C.T. Capital, Ltd. Line of Credit

On June 13, 2013, our
wholly owned subsidiary, First Choice – Brevard, entered into a loan and security agreement (the “Loan Agreement”)
with C.T. Capital, Ltd., d/b/a C.T. Capital, LP, a Florida limited liability partnership (the “Lender”).
Under the Loan Agreement, the Lender committed to make an accounts receivable line of credit in the maximum aggregate amount of
$1,500,000 to First Choice - Brevard with an interest rate of 12% per annum (the “Loan”).

The original maturity
date of the Loan was December 31, 2016 with interest due and payable monthly. Upon default, the interest may be adjusted to the
highest rate permissible by law. The Loan is secured by the accounts receivables and assets of First Choice – Brevard, which
constitute the collateral for the repayment of the Loan. The Loan Agreement also includes covenants, representations, warranties,
indemnities and events of default that are customary for facilities of this type. The advance rate is defined as: 80% of all receivables
to be 120 days or less at the net collection rate of approximately 27% of total billings, excluding patient billings and collections.
Additionally, allowable accounts receivable include 50% of all accounts receivables protected by legal letters of protection.
At any time up until December 31, 2016, the Lender had the right to convert all or any portion of the outstanding principal amount
or interest on the Loan into Common Stock of our Company at a conversion price of $0.75 per share. We did not record an embedded
beneficial conversion feature in the note since the fair value of our Common Stock did not exceed the conversion rate at the date
of commitment.

On
November 8, 2013, in consideration for the issuance of 100,000 restricted shares of our Common stock, the Lender agreed to modify
the Loan. Under the Loan Agreement, as amended, the annual rate of interest of the Loan was reduced from 12% per annum to 6% per
annum and has remained at 6%.

On June 9, 2015, the
Lender increased our accounts receivable line from $1,500,000 to $2,000,000, and on December 14, 2015, increased it further
from $2,000,000 to $2,500,000 and extended the maturity date of the Loan Agreement to June 30, 2017 (“Maturity
Date”). In addition, we agreed to maintain an outstanding balance of not less than $1,000,000 until the Maturity Date
(“Minimum Borrowing”) and provide sixty (60) days prior written notice to prepay up to $1,000,000 of the
outstanding indebtedness in excess of the Minimum Borrowing. All of the other terms and conditions of the Loan Agreement
remain in full force and effect. In consideration of the $500,000 increase in the accounts receivable line of credit, we
issued the Lender 100,000 shares of our Common Stock, valued at $92,000. The $500,000 increase may be repaid at any time, and
is not subject to the conversion provisions set forth in the Loan Agreement.

In December 2016, the
Lender converted $1.4 million in obligations due under the Modification Agreement into 1,866,667 shares of our Common Stock at
a conversion price of $0.75. At December 31, 2016, the Company was obligated, but had not yet issued the 1,866,667 shares of our Common Stock.

On March 30, 2017, the
Company’s Loan and Security Agreement with C.T. Capital, Ltd. (“Lender”) was amended to extend the Maturity
Date to June 30, 2018 (the “Loan”) and further provide that neither the Company nor Lender shall effectuate any conversion
of the Loan to the extent that after giving effect to any such conversion, the Lender would beneficially own in excess of 9.99%
of the number of shares of our Company’s shares of Common Stock outstanding immediately after giving effect to the issuance
of shares of Common Stock issuable upon conversion of the Loan by the Lender.

Our obligations under
the Loan Agreement, as amended, are guaranteed by certain affiliates of our Company, including a personal guarantee
issued by our Chief Executive Officer. All of the other terms and conditions of the Loan Agreement, as amended, remain in
full force and effect.

As
of December 31, 2016 and December 31, 2015, the outstanding balance was $1,100,000 and $2,150,000, respectively.

34

Hillair Capital Investments, L.P. — Convertible Debenture

On
November 8, 2013, we entered into a securities purchase agreement (the “Securities Purchase Agreement”) with Hillair
Capital Investments L.P. (“Hillair”) in exchange for the issuance of (i) a $2,320,000, 8% original issue discount convertible
debenture, which was originally due on December 28, 2013 and subsequently extended on December 28, 2013 through November 1, 2015
(the “Debenture”), and (ii) a Common Stock purchase warrant (the “Warrant”) to purchase up to 2,320,000
shares of our Common Stock at an exercise price of $1.35 per share, which may be exercised on a cashless basis, until November
8, 2018. The Debenture and the Warrant may not be converted if such conversion would result in Hillair beneficially owning in excess
of 4.99% of our Common Stock. Hillair may waive this 4.99% restriction with 61 days’ notice to us.

On January 30, 2015,
we entered into an Extension Agreement (“Extension”) with Hillair amending the 8% Original Issue Discount Secured
Convertible Debenture due November 1, 2015, in order to extend the Periodic Redemption due February 1, 2015, in the principal
amount of $580,000 (the “February Periodic Redemption”) to April 1, 2015.

In
consideration of the Extension, we issued to Hillair 100,000 shares of Common Stock valued at $99,000 and a payment of $30,000.
For an additional $20,000 payment to Hillair, the February Redemption was extended to May 1, 2015.

On
April 9, 2015, the redemption terms of the Debenture were further modified as follows: Hillair agreed to convert $580,000 of the
principal amount of the February Periodic Redemption into 580,000 shares of our Common Stock on or before May 1, 2015. In consideration
of reducing the conversion price of $100,000 principal amount of the Debenture from $1.00 to $0.50 per share, the $580,000 principal
amount of the Debenture due May 1, 2015 was extended to August 1, 2015.

As a result of the
modification, Hillair converted $100,000 principal amount of the Debenture, at $0.50 per share, into 200,000 shares of our
Common Stock; and $580,000 principal amount of the February Periodic Redemption, at $1.00 per share, into 580,000 shares of
our Common Stock. In total, Hillair converted $680,000 principal amount of the Debenture into 780,000 shares of our Common
Stock. As a result of the transaction, we recorded the fair value of the 100,000 additional common shares issued of $128,000
as current period interest expense.

In July 2015 and August
2015, we issued an aggregate of 1,425,707 in full settlement of the outstanding convertible note payable and related accrued interest.
On November 15, 2016, we entered into a Warrant Purchase Agreement with Hillair thereby repurchasing and cancelling the warrant
originally issued to Hillair on November 3, 2013 for total cash consideration of $600,000.

Line of Credit, Florida Business Bank

On June 27, 2012, The
B.A.C.K. Center entered into a Promissory Note (the “Loan Agreement”) with Florida Business Bank, a Florida banking
corporation (the “Lender”). Under the Loan Agreement, the Lender committed to make an accounts receivable line of
credit in the maximum aggregate amount of $1,000,000, with an interest rate of Prime floating plus 1.0%, as published in The
Wall Street Journal, with a floor of 4.50% per annum (the “Loan”).

The Loan was modified
on April 9, 2013, allowing a temporary increase to $1,383,000 and allowing for a one-time draw of up to $995,000 to be distributed
to the shareholders for the purposes of financing the capitalization of TBC Equipment Leasing, LLC. The one-time draw was repaid
within 45 days and the availability under the Loan returned to $1,000,000. The modification allows for an interest rate of one
month Libor floating plus 2.75%, as published in The Wall Street Journal, with a floor of 2.96% per annum (2.96% at December
31, 2016 and 2015, respectively).

Interest is due and payable
monthly and principal is due on demand. The outstanding principal balance plus all accrued but unpaid interest is due on demand
(the “Maturity Date”). The Loan is secured by all assets of The B.A.C.K. Center now owned or hereafter acquired. The
Loan Agreement also includes covenants, representations, warranties, indemnities and events of default that are customary for facilities
of this type. The advance rate is defined as: 60% of Medicare and Medicaid receivables less than 90 days old multiplied by a factor
of 0.25, plus all other receivables less than 90 days old multiplied by a factor of 0.50. As of December 31, 2016, The B.A.C.K.
Center was in compliance with the loan covenants.

35

The obligations of The
B.A.C.K Center under the Loan Agreement are guaranteed by the shareholders of The B.A.C.K. Center. The Loan Agreement is also guaranteed
in the amount of $950,000 by related parties of The B.A.C.K. Center. As of December 31, 2016, the outstanding balance on the Loan
was $439,524.

Sale and Leaseback of Marina Towers

In
March 2016,our wholly owned subsidiary, Marina Towers, LLC, completed the sale and leaseback of its 78,000 square foot office
building, Marina Towers, to Global Medical REIT, Inc. for a sales price of $15.45 million. The net proceeds after repaying
the mortgage and closing costs of $7.45 million was approximately $8 million. In addition, the entire facility, which
houses FCHS’ corporate headquarters and its Medical Center of Excellence, First Choice Medical Group, was leased back
to Marina Towers, LLC via a 10-year absolute triple-net master lease agreement that will expire in 2026; and be renewable for
two five-year periods on the same terms and conditions as the primary lease term with the exception of rent, which will be
adjusted to the prevailing fair market rent at renewal and will escalate in successive years during the extended lease
period.

Growth Initiatives

Currently,
we are actively engaged in identifying and pursuing prospective expansion opportunities in key target markets —
with those being largely in the southeastern U.S. Over the next 12 months, we may incur significant capital costs to further develop
and expand our medical operations. We expect to need additional capital of approximately $6-$8 million to fund the expansion of
our operations in 2017. However, there can be no assurance that we will be able to negotiate acceptable terms for, or find suitable
candidates for, such expansion consideration.

There can be no assurance
that our cash flow will increase in the near future from anticipated new business activities, or that revenues generated from our
existing operations will be sufficient to allow us to continue to pursue new customer programs or profitable ventures.

Contractual Obligations

At December 31, 2016,
we had certain obligations and commitments under our loans and leases totaling $50,591,625 as follows:

Total

2016

2017

2018

2019 andthereafter

Leases

$

50,057,642

$

5,638,245

$

5,680,342

$

5,728,741

$

33,010,314

Loans

533,983

519,452

14,531

—

—

Total

$

50,591,625

$

6,157,697

$

5,694,873

$

5,728,741

$

33,010,314

Inflation

Our opinion is that inflation
has not had, and is not expected to have, a material effect on our operations.

Climate Change

Our opinion is that neither
climate change, nor governmental regulations related to climate change, have had, or are expected to have, any material effect
on our operations.

Off-Balance Sheet Arrangements

At December 31, 2016,
we did not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our
financial condition, changes in financial condition, revenue or expenses, results of operations, liquidity, capital expenditures
or capital resources.

36

New Accounting Pronouncements

We do not expect recent
accounting pronouncements will have a material impact on our condensed consolidated financial position, results of operations or
cash flows.

ITEM 7A.

QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

This Item is not required
for a Smaller Reporting Company.

ITEM 8.

FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA

Our financial statements
are contained in pages F-1 through F-41, which appear at the end of this Annual Report on Form 10-K.

ITEM 9.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A.

CONTROLS AND PROCEDURES

Evaluation of Disclosure and Control Procedures

Our
Chief Executive Officer and Chief Financial Officer evaluated the effectiveness of our disclosure controls and procedures as
of December 31, 2016 and had concluded that our disclosure controls and procedures are effective. The term disclosure
controls and procedures means controls and other procedures that are designed to ensure that information required to be
disclosed in the reports that we file or submit under the Securities Exchange Act of 1934, as amended, is recorded,
processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls
and procedures include, without limitation, controls and procedures designed to ensure that information required to be
disclosed in the reports that we file or submit under the Securities Exchange Act of 1934 is accumulated and communicated to
our management, including our principal executive and principal financial officers, or persons performing similar functions,
as appropriate to allow timely decisions regarding required disclosure.

Management’s Report on Internal Control over Financial
Reporting

Our management is responsible
for establishing and maintaining an adequate system of internal control over financial reporting, as defined in Rule 13a-15(f)
under the Exchange Act. Our internal control over financial reporting is designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements in accordance with Generally Accepted Accounting
Principles (“GAAP”).

Because of its inherent
limitations, a system of internal control over financial reporting can provide only reasonable assurance of such reliability and
may not prevent or detect misstatements. Also, projection of any evaluation of effectiveness to future periods is subject to the
risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.

Management
has conducted, with the participation of our Chief Executive Officer and Chief Financial Officer, an assessment of the effectiveness
of our internal control over financial reporting as of December 31, 2016. Management’s assessment of internal control over
financial reporting used the criteria set forth in SEC Release 33-8810 based on the framework established by the Committee of Sponsoring
Organizations of the Treadway Commission (“COSO”) in Internal Control over Financial Reporting — Guidance
for Smaller Public Companies. Based on this evaluation, management concluded that our system of internal control over financial
reporting was effective as of December 31, 2016 based on these criteria.

This Annual Report on Form
10-K does not include an attestation report of our independent registered public accounting firm regarding internal control over
financial reporting. As a smaller reporting company, our management’s report was not subject to attestation by our registered
public accounting firm pursuant to rules of the Securities and Exchange Commission that permit us to provide only the management’s
report.

37

Changes in Internal Control over Financial Reporting

There were no changes in
our internal control over financial reporting, as defined in Rules 13a-15(t) and 15d-15(f) under the Exchange Act, during the fourth
quarter of the year ended December 31, 2016 that have materially affected, or are reasonably likely to materially affect, our internal
control over financial reporting.

ITEM 9B.

OTHER INFORMATION

None.

38

PART III

ITEM 10.

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The following table and
biographical summaries set forth information, including principal occupation and business experience about our directors and executive
officers:

A serial entrepreneur and
proven senior executive with experience in a broad range of industries, Mr. Romandetti has served as First Choice Healthcare Solution’s
Chairman, President and CEO since December 2010. In this role, he is responsible for articulating our Company’s vision and
executing strategies that place clinically superior, patient-centric care and improved clinical outcomes at the core of FCHS’s
corporate mission.

Since 2003 through to the
present, Mr. Romandetti has been the Managing Member of Marina Towers, LLC, which is now a wholly owned subsidiary of First Choice
Healthcare Solutions; and the Managing Member of C&K, LLC, a property holding company. Since 2007, he has also lent his business
building expertise to medical practices and MRI centers as a professional business consultant to the healthcare industry. Previously,
he was a founding director of Sunrise Bank, a community bank serving local businesses in Florida’s Space Coast and served
as an executive officer for numerous companies in the real estate, marine, automotive and construction products industries.

Timothy K. Skeldon — Chief Financial Officer

Mr. Skeldon was appointed
Chief Financial Officer in July, 2016. From 1999 through 2016, he served as Chief Financial Officer of Parrish Medical Center,
an award-winning 210-bed medical center serving North Brevard County, Florida. Prior to joining Parrish in 1999, Mr. Skeldon served
as Vice President and CFO of Central Florida Regional Hospital, a full service, level II trauma center. Other previous executive
posts have included Controller of Lucerne Medical Center, Controller and Director of Financial Planning of Parrish and Director
of Corporate Accounting for Fawcett Memorial Hospital in Port Charlotte, Florida. He began his career working as a Senior Audit
Accountant for Ernst & Young after graduating from the University of Central Florida with B.S.B.A. and M.S. degrees in Accounting.

Donald A. Bittar —Director

In December 2010, Mr.
Bittar was appointed as our Company’s CFO, Treasurer and Secretary and a member of the Board of Directors. In November
2014, he briefly retired from his role as First Choice’s CFO, but returned in March 2015 and again retired in July 2016
upon the appointment of Mr. Skeldon.

Mr. Bittar brings our Company
more than 30 years’ experience working with companies as an officer, board member and consultant. Before joining the First
Choice leadership team, he served as President and Chairman of Associated Mortgage of North America and President of DA Bittar
and Associates, Inc., a management and technology consulting firm that he founded in 1980. From 1969 to 1980, he was Chairman,
President and CEO of Marine Telephone, Inc.

39

At
the age of 22, Mr. Bittar was recognized as one of the youngest individuals in history at that time to earn a broker dealer license,
subsequently leading Bittar Securities, a stock brokerage firm based on Wall Street in New York City. Among other notable career
accomplishments, he served as a project manager at General Electric, tasked with developing and implementing Medinet, the nation’s
first shared hospital information system, which was deployed in New York University Hospital, Bellevue Hospital and Mass General.
At Western Union, he succeeded in introducing the nation’s first barcode application for use at New York University Hospital,
and pioneered one of the first automated medical record management systems to better manage inner city pediatric patients for Bellevue
Hospital.

Since 1969, he has also
taught finance, management and information technology at several leading undergraduate and graduate schools. Currently, Mr. Bittar
is an Adjunct Professor at Florida Institute of Technology, College of Business, where he was honored as Teacher of the Year in
2013.

In
addition to authoring two books, Getting Under the Hood of an Annual Report and A Good Business Plan is a Beautiful Thing, Mr.
Bittar invented and was granted a U.S. patent for an adjustable sling that can be used to hold a patient’s arm, wrist and
hand in multiple positions while eliminating stress to the neck and shoulder. He has been a frequent speaker at the National Association
of Mortgage Bankers, National Council of Savings Institutions, Council of Presidents, New England Bankers Association and National
Corporate Cash Managers Association. Donald received a Master of Business Administration degree from Long Island University.

Board of Directors’ Term of Office

Directors are elected at
our annual meeting of shareholders and serve for one year until the next annual meeting of shareholders or until their successors
are elected and qualified.

Family Relationships

There are no family relationships
among the Officers and Directors, nor are there any arrangements or understanding between any of the Directors or Officers of our
Company or any other person pursuant to which any Officer or Director was or is to be selected as an Officer or Director.

Involvement in Certain Legal Proceedings

During the last ten years,
none of our officers, directors, promoters or control persons have been involved in any legal proceedings as described in Item
401(f) of Regulation S-K.

Board Meetings; Committee Meetings; and Annual Meeting Attendance

During 2016, the Board
of Directors held 25 meetings. Each meeting was attended by all of the members of the Board.

Committees of the Board of Directors

There are currently no
committees of the Board of Directors.

Changes in Nominating Process

There
are no material changes to the procedures by which security holders may recommend nominees to our Board of Directors.

Shareholder Recommendations for Board Nominees

The Board does not have
a Governance or Nominating Committee that is tasked with identifying individuals qualified to become Board members and recommending
to the Board the director nominees for the next annual meeting of shareholders. Until such committee is formed, the shareholder
recommendations for Board nominees would be directed to the entire Board, who will consider the qualifications of the person recommended
based on a variety of factors, including:

40

●

the appropriate size and the diversity of our Board;

●

our needs with respect to the particular talents and experience of our directors;

●

the knowledge, skills and experience of nominees, including experience in
technology, business, finance, administration or public service, in light of prevailing business conditions and the knowledge,
skills and experience already possessed by other members of the Board;

●

experience with accounting rules and practices;

●

whether such person qualifies as an “audit committee financial expert” pursuant to
the SEC Rules;

●

appreciation of the relationship of our business to the changing needs of society; and

●

the desire to balance the considerable benefit of continuity with the periodic
injection of the fresh perspective provided by new members.

Compliance with Section 16(A) of the Exchange Act

Section 16(a) of the Exchange
Act requires our Company’s directors, officers and stockholders who beneficially own more than 10% of any class of equity
securities of our Company registered pursuant to Section 12 of the Exchange Act, collectively referred to herein as the “Reporting
Persons,” to file initial statements of beneficial ownership of securities and statements of changes in beneficial ownership
of securities with respect to our Company’s equity securities with the SEC. All Reporting Persons are required by SEC regulation
to furnish us with copies of all reports that such Reporting Persons file with the SEC pursuant to Section 16(a). Based solely
on our review of the copies of such reports and upon written representations of the Reporting Persons received by us, we believe
that all Section 16(a) filing requirements applicable to such Reporting Persons have been timely met.

Code of Ethics

We have adopted a Code
of Ethics for adherence by our Chief Executive Officer and Chief Financial Officer to ensure honest and ethical conduct; full,
fair and proper disclosure of financial information in our periodic reports filed pursuant to the Securities Exchange Act of 1934;
and compliance with applicable laws, rules, and regulations. Any person may obtain a copy of our Code of Ethics, without charge,
by mailing a request to our Company at the address appearing on the front page of this Annual Report on Form 10-K or by viewing
it on our website found at www.myfchs.com.

ITEM 11.

EXECUTIVE COMPENSATION

The following table sets
forth compensation information for services rendered by certain of our executive officers in all capacities during the last two
completed fiscal years. The following information includes the dollar value of base salaries and certain other compensation, if
any, whether paid or deferred.

41

Summary Compensation
Table

Name and Position(s)

Year

Salary
($)

Bonus
($)

Stock Awards
($)

Other
($)(1)

Total Compensation
($)

Christian C. Romandetti (1)(3)(4)

2016

275,625

100,000

0

12,207

387,832

President, CEO & Director

2015

262,500

625,000

314,700

12,196

1,214,396

Timothy K. Skeldon (1)(2)

2016

110,577

0

25,000

6,940

142,517

CFO, Secretary & Treasurer

2015

0

0

0

0

0

Donald A. Bittar (2)

2016

58,500

0

55,800

0

114,300

Former CFO, Director

2015

73,280

0

95,700

0

168,980

(1)

Consists of provision of an automobile, computer equipment and reimbursement
of business expenses.

(2)

Mr. Bittar retired as CFO on July 2016 upon the appointment of Mr. Skeldon
as CFO.

Mr. Romandetti waived his right to receive
the earned bonuses and options in 2016.

Employment Agreements

Employment Agreement with Christian Romandetti, President and
CEO

Our
Company entered a formal five-year employment agreement (the “Employment Agreement”) with Christian “Chris”
Romandetti, dated March 20, 2014 and effective January 1, 2014, to serve as our President and Chief Executive Officer. Pursuant
to the terms and conditions set forth in the Employment Agreement, Mr. Romandetti is entitled to receive an annual base salary
of $250,000, which shall increase no less than 5% per annum for the term of the Employment Agreement. Mr. Romandetti is entitled
to (i) five weeks of vacation per year that if not used in any given one year will accrue and (ii) participate in all benefit plans
our Company provides to its senior executives and our Company will pay 100% of all costs associated with such plans and will reimburse
Mr. Romandetti for all reasonable out-of-pocket expenses and $1,000 per month for auto expenses.

Mr.
Romandetti, upon successfully achieving annual revenue milestones, is entitled to receive a bonus equal to 10% of his salary when
$7.1 million in total annual revenue is reported in a fiscal year scaling up to a bonus equal to 800% of his salary if and when
$100 million in total annual revenue is reported in a fiscal year. Mr. Romandetti signed a waiver and consent to forego receiving
the bonus earned in 2016. If our Company is unable to pay any portion of the bonus compensation when due because of insufficient
liquidity or applicable restrictions under prevailing debt financing agreements, then, as an accommodation to our Company, Mr.
Romandetti shall be able to convert bonus compensation into shares of our Common Stock at a 30% discount to the average closing
price during the first calendar month after the end of the fiscal year. Mr. Romandetti will also be entitled to receive a strategic
bonus of $100,000, payable in cash, on the sixth month anniversary of opening each new Medical Center of Excellence.

Pursuant to our Company
achieving specific financial performance benchmarks established by the Board of Directors, Mr. Romandetti will also be entitled
to receive a cashless option to purchase up to 1,000,000 shares of Common Stock per year. The exercise price of the options will
be the fair market value of the average closing price of the stock during the first calendar month after the end of the fiscal
year. Mr. Romandetti shall have up to five years from the date of the annual option grant to exercise the option. In addition
to the above compensation consideration, Mr. Romandetti will be entitled to receive annual restricted stock compensation equal
to 100% of the total base salary and bonus compensation. The fair market value of the restricted stock grant shall be determined
using the average closing price of our Common Stock during the first calendar month after the end of the fiscal year. Mr. Romandetti
signed a waiver and consent to forego receiving the options earned for 2016.

42

Upon the expiration of
the initial five-year term, the Employment Agreement shall automatically be extended for additional terms of one year each unless
either party gives 90-day prior written notice of non-renewal. In addition, Mr. Romandetti’s Employment Agreement provides
that, upon Mr. Romandetti’s death, disability, termination for any reason other than “Cause” (as such term is
defined in the Employment Agreement) or resignation for “Good Reason” (as such term is defined in the Employment Agreement),
our Company will pay to Mr. Romandetti 12 months of his annual base salary at the time of separation in accordance with our Company’s
usual payroll practices and in case of disability additionally the payment on a prorated basis of any bonus or other payments earned
in connection with our Company’s then-existing bonus plan in place at the time of such termination. Finally, Mr. Romandetti
is subject to standard non-compete and non-solicit covenants during the course of his employment and for a period of 12 months
after the date that he is no longer employed by our Company.

Employment Agreement with Timothy K. Skeldon, CFO

Pursuant to an Employment
Agreement between our Company and Mr. Timothy K. Skeldon, our CFO effective July 11, 2016, he receives an annual salary of $250,000
and an additional annual bonus of $25,000 per year for each completed year of employment. Further, he will be granted a total of
150,000 shares of our Company’s Common Stock with a three-year vesting schedule. Up to 50,000 shares per year are eligible
to vest based on annual revenue and EBITDA benchmarks agreed upon by Mr. Skeldon and our Company. Shares will be issued on a percentage
of actual amount achieved. He will also be eligible to participate in our Company’s health plan and other benefits on the
same terms as other Company executives.

Compensation of Directors

The following table sets
forth the compensation paid to our Board of Directors in fiscal 2016:

We do not have any contract,
agreement, plan or arrangement that provides for any payment to any of our Named Executive Officers at, following, or in connection
with a termination of the employment of such Named Executive Officer, a change in control of our Company or a change in such Named
Executive Officer’s responsibilities.

The following table sets
forth information as of March 30, 2017 based on information obtained from the persons named below, with respect to the
beneficial ownership of our common and preferred stock by (i) each person (including groups) known to us to be the beneficial
owner of more than five percent (5%) of our Common Stock, or (ii) each Director and Officer, and (iii) all Directors and Officers
of our Company, as a group. Except as otherwise indicated, all stockholders have sole voting and investment power with respect
to the shares listed as beneficially owned by them, subject to the rights of spouses under applicable community property laws.

43

Name and Address of Beneficial Owner

Number of Shares of Common Stock (1) (2)

Percent of Class

Christian C. Romandetti (3)

6,806,559

25.39

%

Timothy K. Skeldon (9)

150,000

0.56

%

Donald A. Bittar (4)

616,666

2.30

%

All Executive Officers and Directors as a Group (3 Individuals)

7,573,225

28.25

%

C.T. Capital, Ltd. (5)

2,666,667

9.95

%

MedTRX Provider Network, LLC (6)(7)

2,075,000

7.74

%

Fuse Capital, LLC (8)

1,598,735

5.97

%

(1)

Except as otherwise indicated, we believe that the beneficial owners of the Common Stock listed above, based on information furnished by such owners, have sole investment and voting power with respect to such shares, subject to community property laws where applicable. Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Shares of Common Stock subject to options or warrants currently exercisable, or exercisable within 60 days, are deemed outstanding for purposes of computing the percentage ownership of the person holding such option or warrants, but are not deemed outstanding for purposes of computing the percentage ownership of any other person.

(2)

Based on 26,803,994 shares of Common Stock
issued and outstanding as of March 30, 2017.

(3)

Of the reported securities, 5,750,000 shares are owned by
Romandetti Family Trust, 746,559 shares are owned by Mr. Romandetti and 310,000 shares are owned by Mr. Romandetti’s
wife. Mr. Romandetti disclaims beneficial ownership of the reported securities, except to the extent of his pecuniary interest
therein. The address for Mr. Romandetti is c/o 709 S. Harbor City Blvd., Suite 530, Melbourne, Florida 32901.

On June 13, 2013, we entered into a Loan and Security Agreement
(the “Loan Agreement”) with C.T. Capital, Ltd, a Florida Limited Partnership. Under the Loan Agreement and
subsequent amendments, C.T. Capital committed to make an accounts receivable line of credit to a maximum aggregate amount
of $2,500,000. C.T. Capital may convert all or any portion of the outstanding principal amount – up to $2,000,000
– or interest on the loan into our Common Stock at a price equal to $0.75 per share. In December 2016, C.T. Capital
converted $1,400,000 of the outstanding principal amount to 1,866,667 shares of Common Stock. For purposes of percent ownership
calculation, we have assumed that the remaining $600,000 eligible for conversion to equity was converted into our Common Stock
at a price of $0.75 per share. The address of C.T. Capital, Ltd. is 6300 NE First
Avenue, Suite 201, Fort Lauderdale, Florida 33334. (See Note 22 – Subsequent Events).

(6)

Comprised of 400,000 shares of restricted Common Stock issued in the legal settlement; and a cash warrant to purchase 1,875,000 shares of Common Stock that may be exercised on or prior to the close of business on December 23, 2018 at $3.60 per share. For purposes of percent ownership calculation, we have assumed that the warrant was exercised at an exercise price of $3.60 per share.

The address of Fuse Capital, LLC is 40 Hemlock Drive, Rosyln, New York 11576.

(9)

Includes 150,000 performance-based, restricted stock units granted on May 31, 2016, vesting over three years, based on the achievement of certain defined annual financial benchmarks. The address of Mr. Skeldon is c/o 709 S. Harbor City Blvd., Suite 530, Melbourne, Florida 32901.

44

Equity Compensation Plans

The following table sets
forth information as of December 31, 2016 with respect to compensation plans under which we are authorized to issue shares of our
Common Stock, aggregated as follows:

●All compensation plans previously approved by security holders;
and

●All compensation plans not previously approved by security holders.

Equity Compensation Plan Information

Plan Category

Number of securities to be issued upon exercise of outstanding options, warrants and rights

Number of securities remaining available for future issuance under equity compensation plans

(a)

(b)

(c)

Equity compensation plans approved by security holders

380,500

$

0.80

119,500

Equity compensation plans not approved by security holders

0

$

0.00

0

Total

380,500

$

0.80

119,500

On March 14, 2012, we adopted
our 2011 Incentive Stock Plan (the “2011 Plan”), pursuant to which 500,000 shares of our Common Stock are reserved
for issuance as awards to employees, directors, officers, consultants, and other service providers of our Company and its subsidiaries
(an “Optionee”). The term of the 2011 Plan is ten years from January 6, 2012, its effective date.

Terms and Conditions of Options Pursuant
to the 2011 Incentive Stock Plan

Options granted under the
Plan shall be subject to the following conditions and shall contain such additional terms and conditions, not inconsistent with
the terms of the Plan, as the Plan committee shall deem desirable:

●

Option Price. The purchase price of each share of Stock purchasable under an incentive
option shall be determined by the Plan committee at the time of grant, but shall not be less than 100% of the Fair Market Value
(as defined below) of such share of Stock on the date the option is granted; provided , however , that with respect to an Optionee
who, at the time such incentive option is granted, owns (within the meaning of Section 424(d) of the United States Internal Revenue
Code of 1986 (the “Code)) more than 10% of the total combined voting power of all classes of stock of our Company or of any
subsidiary, the purchase price per share of Stock shall be at least 110% of the Fair Market Value per share of Stock on the date
of grant. The purchase price of each share of Stock purchasable under a nonqualified option shall not be less than 100% of the
Fair Market Value of such share of Stock on the date the option is granted. The exercise price for each option shall be subject
to adjustment as provided in the Plan. “Fair Market Value” means the fair market value of our Company’s issued
and outstanding Stock as determined in good faith by the Plan committee. In no event shall the purchase price of a share of Stock
be less than the minimum price permitted under the rules and policies of any national securities exchange on which the shares of
Stock are listed.

45

●

Option Term. The term of each option shall be fixed by the Plan committee, but no
option shall be exercisable more than ten years after the date such option is granted and in the case of an Incentive Option granted
to an Optionee who, at the time such incentive option is granted, owns (within the meaning of Section 424(d) of the Code) more
than 10% of the total combined voting power of all classes of stock of our Company or of any subsidiary, no such incentive option
shall be exercisable more than five years after the date such incentive option is granted.

●

Exercisability. Options shall be exercisable at such time or times and subject to
such terms and conditions as shall be determined by the Plan committee at the time of grant; provided , however ,
that in the absence of any option vesting periods designated by the Plan committee at the time of grant, options shall vest and
become exercisable as to one-tenth of the total number of shares subject to the option on each of the three month anniversary of
the date of grant; and provided further that no options shall be exercisable until such time as any vesting limitation required
by Section 16 of the Exchange Act, and related rules, shall be satisfied if such limitation shall be required for continued validity
of the exemption provided under Rule 16b-3(d)(3).

Upon the occurrence of
a “Change in Control” (as hereinafter defined), the Plan committee may accelerate the vesting and exercisability of
outstanding options, in whole or in part, as determined by the Plan committee in its sole discretion. In its sole discretion, the
Plan committee may also determine that, upon the occurrence of a Change in Control, each outstanding option shall terminate within
a specified number of days after notice to an Optionee thereunder, and each such Optionee shall receive, with respect to each share
of Company Stock subject to such option, an amount equal to the excess of the Fair Market Value of such shares immediately prior
to such Change in Control over the exercise price per share of such option; such amount shall be payable in cash, in one or more
kinds of property (including the property, if any, payable in the transaction) or a combination thereof, as the Plan committee
shall determine in its sole discretion.

For purposes of the Plan,
unless otherwise defined in an employment or consulting agreement between our Company and the relevant Optionee, a Change in Control
shall be deemed to have occurred if:

●

a tender offer (or series of related offers) shall be made and consummated for the ownership of
50% or more of the outstanding voting securities of our Company, unless as a result of such tender offer more than 50% of the outstanding
voting securities of the surviving or resulting corporation shall be owned in the aggregate by the stockholders of our Company
(as of the time immediately prior to the commencement of such offer), any employee benefit plan of our Company or its subsidiaries,
and their affiliates;

●

our Company shall be merged or consolidated with another corporation, unless as a result of
such merger or consolidation more than 50% of the outstanding voting securities of the surviving or resulting corporation
shall be owned in the aggregate by the stockholders of our Company (as of the time immediately prior to such transaction),
any employee benefit plan of our Company or its subsidiaries, and their affiliates;

●

we shall sell substantially all of our assets to another corporation that is not wholly owned by
our Company, unless as a result of such sale more than 50% of such assets shall be owned in the aggregate by the stockholders of
our Company (as of the time immediately prior to such transaction), any employee benefit plan of our Company or its subsidiaries
and their affiliates; or a Person (as defined below) shall acquire 50% or more of the outstanding voting securities of our Company
(whether directly, indirectly, beneficially or of record), unless as a result of such acquisition more than 50% of the outstanding
voting securities of the surviving or resulting corporation shall be owned in the aggregate by the stockholders of our Company
(as of the time immediately prior to the first acquisition of such securities by such Person), any employee benefit plan of our
Company or its subsidiaries, and their affiliates.

Notwithstanding the foregoing,
if Change of Control is defined in an employment or consulting agreement between our Company and the relevant Optionee, then, with
respect to such Optionee, Change of Control shall have the meaning ascribed to it in such employment agreement.

46

Ownership of
voting securities shall take into account and shall include ownership as determined by applying the provisions of Rule 13d-3(d)(I)(i)
(as in effect on the date hereof) under the Exchange Act. In addition, for such purposes, “Person” shall have the meaning
given in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14 (d) thereof; provided , however , that
a Person shall not include (A) our Company or any of its subsidiaries; (B) a trustee or other fiduciary holding securities under
an employee benefit plan of our Company or any of its subsidiaries; (C) an underwriter temporarily holding securities pursuant
to an offering of such securities; or (D) a corporation owned, directly or indirectly, by the stockholders of our Company in substantially
the same proportion as their ownership of stock of the Company.

Description of Securities

First
Choice Healthcare Solutions has 100,000,000 Common Stock, par value $0.001 per share, authorized for issuance and 1,000,000 Preferred
Stock, par value $0.10 per share, authorized for issuance. As of March 30, 2017, there were 26,803,994 shares
of Common Stock issued and outstanding. There were no shares of Preferred Stock that are issued and outstanding.

On August 12, 2011,
Marina Towers, LLC, a Florida limited liability company (“Marina Towers”) an indirect and wholly owned subsidiary
of Medical Billing Assistance, Inc., a Colorado company (the “Company”) entered into a Loan Agreement (the
“Loan Agreement”) with Guggenheim Life and Annuity Company, a Delaware life insurance company
(“Guggenheim”). The closing and funding of the Loan occurred on August 15, 2011 (the “Closing Date”).
Under the Loan Agreement, Guggenheim has committed to make a loan in the aggregate amount of $7,550,000.00 to Marina Towers
with an interest rate of 6.10% per annum (the “Loan”). The maturity date of the Loan is September 16, 2016 (the
“Maturity Date”). The Loan is evidenced by that certain Consolidated, Amended and Restated Promissory Note, dated
August 12, 2011 (the “Note”) and is secured primarily by: (i) that certain first priority Consolidated, Amended
and Restated Mortgage and Security Agreement, dated August 12, 2011, encumbering the real and personal property (the
“Property”) of Marina Towers (the “Mortgage”); and (ii) that certain first priority Assignment of
Leases and Rents, dated August 12, 2011, from Marina Towers, as assignor, to Guggenheim as assignee, pursuant to which Marina
Towers assigned to Guggenheim all of Marina Towers’ right, title and interest in and to certain leases and rents as
security for the Loan.

The proceeds of the Loan
were used to: (i) repay and discharge existing loans relating to the Property; (ii) pay all past-due basic carrying costs, if any,
with respect to the Property; (iii) make deposits into the reserve funds, or any escrow accounts established pursuant to the loan
documents, on the Closing Date in the amounts set forth in the Loan Agreement; (iv) pay costs and expenses incurred in connection
with the closing of the Loan; (v) fund any working capital requirements of the Property; and (vi) distribute the balance, if any,
to Marina Towers.

Pursuant
to the Loan Agreement, Marina Towers does not have the right to prepay the Loan, in whole or in part, prior to the Maturity Date.
After the payment date occurring three months prior to the Maturity Date, Marina Towers may, provided no event of default has occurred
and is continuing, at its option and upon thirty days’ prior notice to Guggenheim, prepay the Loan in whole on any date without
payment of any prepayment penalty or premiums.

The Loan Agreement is guaranteed
by Christian C. Romandetti, our Company’s Chief Executive Officer, pursuant to that certain Guaranty Agreement, dated August
12, 2011, made by Mr. Romandetti for the benefit of Guggenheim (the “Guaranty”). Pursuant to the non-recourse Guaranty,
Mr. Romandetti agreed to a limited personal guarantee to Guggenheim of the payments and performance of the obligations of and liabilities
of Marina Towers pursuant to the Loan Agreement.

On March 31, 2016, we completed
the sale and leaseback of Marina Towers. Global Medical REIT Inc. purchased the building and land for $15.45 million. In addition,
the entire facility, which houses our corporate headquarters and Medical Center of Excellence, First Choice Medical Group, was
leased back to Marina Towers, LLC via a 10-year absolute triple-net master lease agreement that will expire in 2026; and be renewable
for two five-year periods on the same terms and conditions as the primary lease term with the exception of rent, which will be
adjusted to the prevailing fair market rent at renewal and will escalate in successive years during the extended lease period.
In association with the sale of Marina Towers, the loan was fully repaid.

47

Director Independence

Currently, none of our
directors qualify as independent directors under the NASDAQ listing standards and Rule 10A-3 and Rule 10C-1 of the Exchange Act.

ITEM 14.

PRINCIPAL ACCOUNTANT FEES AND SERVICES

Audit Fees

Our independent auditor, RBSM LLP, billed an
aggregate of $128,201 for the year ended December 31, 2016 and the quarterly reviews for the year ended December 31, 2016. RBSM
LLP billed $81,001 for the December 31, 2015 audit, quarterly reviews for the year ended December 31, 2015. In addition, $10,000
and $7,000 was billed for tax services in 2016 and 2015, respectively. In 2015, RBSM LLP also bills other fees of $144,656 relating
to the audits of The B.A.C.K. Center and Crane Creek Surgery Center. Audit Fees and Audit Related Fees consist of fees billed for
professional services rendered for auditing our Financial Statements, reviews of interim Financial Statements included in quarterly
reports, services performed in connection with other filings with the Securities & Exchange Commission and related comfort
letters and other services that are normally provided by our independent auditors in connection with statutory and regulatory filings
or engagements. Tax Fees consists of fees billed for professional services for tax compliance, tax advice and tax planning. These
services include assistance regarding federal, state and local tax compliance and consultation in connection with various transactions
and acquisitions. All Other Fees consists of fees billed for professional services associated with the auditing of The B.A.C.K.
Center and Crane Creek Surgery Center.

2016

2015

Audit Fees

$

111,500

$

81,001

Audit-Related Fees

0

—

Tax Fees

10,000

7,000

All Other Fees

61,200

144,656

Total

$

182,700

$

232,657

48

PART IV

ITEM 15.

EXHIBITS, FINANCIAL STATEMENT SCHEDULES

Exhibit No.

Description

3.1

Articles of Incorporation of Medical Billing Assistance, Inc. (the “Company”) (incorporated by reference to the Company’s Form SB-2 Registration Statement as filed December 20, 2007)

3.1(a)

Certificate of Incorporation of First Choice Healthcare Solutions, Inc. (incorporated by reference to Annex B to the Company’s Information Statement on Schedule 14C, filed with the SEC on March 14, 2012)

3.1(b)

Certificate of Merger between First Choice Healthcare Solutions, Inc., a Delaware and surviving corporation and Medical Billing Assistance, Inc., a Colorado corporation. (incorporated by reference to Exhibit 3.1(B) to the Company’s Current Report on Form 8-K, filed with the SEC on April 9, 2012)

3.2

By-laws of the Company (incorporated by reference to the Company’s Form SB-2 Registration Statement as filed December 20, 2007)

3.2(a)

By-laws of First Choice Healthcare Solutions, Inc. (incorporated by reference to Annex C to the Company’s Information Statement on Schedule 14C, filed with the SEC on March 14, 2012)

4.1

Medical Billing Assistance, Inc. 2011 Incentive Stock Plan (incorporated by reference to Annex E to the Company’s Information Statement on Schedule 14C, filed with the SEC on March 14, 2012)

10.1

Share Exchange Agreement dated December 29, 2010, by and between the Company, FCID Medical, Inc., and FCID Holdings, Inc. (incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on January 3, 2011)

10.5

Loan Agreement dated as of August 12, 2011, between Marina Towers, LLC (“Marina”) and Guggenheim Life and Annuity Company (“Guggenheim”) (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on August 22, 2011)

10.6

Florida Consolidated Amended and Restated Promissory Note, dated August 12, 2011, made by Marina to Guggenheim (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed with the SEC on August 22, 2011)

10.7

Agreement and Plan of Merger made as of February 13, 2012, by and between the Company and First Choice Healthcare Solutions, Inc. (incorporated by reference to Appendix A to the Company’s Information Statement on Schedule 14C, filed with the SEC on March 14, 2012)

10.8

Membership Interest Purchase Closing Agreement between Seller, FCID Medical, Inc. and First Choice Medical Group of Brevard, LLC (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on April 9, 2012)

10.9

Management Services Agreement between FCID Medical, Inc. and First Choice Medical Group of Brevard, LLC (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed with the SEC on April 9, 2012)

10.10

Loan Agreement dated February 1, 2012, between FCID of Medical, Inc. and CCR of Melbourne, Inc. (incorporated by reference to Exhibit 10.11 to the Company’s Quarterly Report on Form 10-Q, filed with the SEC on May 15, 2012)

10.11

Revolving Line of Credit Promissory Note, dated February 15, 2012, in the amount of $500,000, issued by FCID Medical, Inc. to CCR of Melbourne, Inc. (incorporated by reference to Exhibit 10.12 to the Company’s Quarterly Report on Form 10-Q, filed with the SEC on May 15, 2012)

49

Exhibit No.

Description

10.12

Promissory Note, dated as of May 18, 2012, made by First Choice Medical Group of Brevard, LLC to the order of General Electric Capital Corporation, in the amount of $450,000 (incorporated by reference to Exhibit 10.14 to the Company’s Current Report on Form 8-K, filed with the SEC on May 25, 2012)

10.13

Master Lease Agreement, dated as of May 10, 2012, between First Choice Medical Group of Brevard, LLC and General Electric Capital Corporation, with schedules (incorporated by reference to Exhibit 10.15 to the Company’s Current Report on Form 8-K, filed with the SEC on May 25, 2012)

10.13(a)

Guaranty dated May 10, 2012, by Christian Romandetti to General Electric Capital Corporation (incorporated by reference to Exhibit 10.16 to the Company’s Current Report on Form 8-K, filed with the SEC on May 25, 2012)

10.13(b)

Guaranty dated May 10, 2012, by First Choice Healthcare Solutions, Inc. to General Electric Capital Corporation (incorporated by reference to Exhibit 10.17 to the Company’s Current Report on Form 8-K, filed with the SEC on May 25, 2012)

10.14

Securities Purchase Agreement made as of December 14, 2012, with note as an exhibit thereto, for the sale of an 8% convertible note in the principal amount of $203,500 (incorporated by reference to Exhibit 10.17 to the Company’s Annual Report on Form 10-K, filed with the SEC on March 31, 2014).

10.15

Securities Purchase Agreement made as of February 19, 2013, with note as an exhibit thereto, for the sale of an 8% convertible note in the principal amount of $103,500 (incorporated by reference to Exhibit 10.18 to the Company’s Annual Report on Form 10-K, filed with the SEC on March 31, 2014).

10.16

Securities Purchase Agreement made as of August 14, 2013, for the sale of an 8% convertible note in the principal amount of $153,500, with note as an exhibit thereto(incorporated by reference to Exhibit 10.19 to the Company’s Annual Report on Form 10-K, filed with the SEC on March 31, 2014).

10.17

Agreement, dated as of May 1, 2013, between MTI Capital LLC and First Choice Healthcare Solutions, Inc. (incorporated by reference to Exhibit 10.20 to the Company’s Annual Report on Form 10-K, filed with the SEC on March 31, 2014).

10.18

Loan and Security Agreement dated as of June 13, 2013, by and
between C.T. Capital Ltd and First Choice Medical Group of Brevard, LLC (incorporated by reference to Exhibit 10.21
to the Company’s Annual Report on Form 10-K, filed with the SEC on March 31, 2014).

10.18(a)

Agreement to Modify Loan Interest Rate and Consent to FCHS Secured Debt Issuance, dated June 13, 2013, by and between C.T. Capital Ltd and First Choice Medical Group of Brevard, LLC (incorporated by reference to Exhibit 10.21(a) to the Company’s Annual Report on Form 10-K, filed with the SEC on March 31, 2014).

10.19

Form of Membership Interest Purchase Agreement dated August 28, 2013, by and between the Company and the sellers of the membership interests in MedTech Diagnostics LLC (incorporated by reference to Exhibit 10.22 to the Company’s Annual Report on Form 10-K, filed with the SEC on March 31, 2014).

10.20

License Agreement dated August 28, 2013, by and between Donald Bittar and First Choice Healthcare Solutions, Inc.(incorporated by reference to Exhibit 10.23 to the Company’s Annual Report on Form 10-K, filed with the SEC on March 31, 2014).

10.21

Amendment to Loan Agreement dated as of August 28, 2013, by and among MTI Capital LLC and First Choice Healthcare Solutions, Inc.(incorporated by reference to Exhibit 10.24 to the Company’s Annual Report on Form 10-K, filed with the SEC on March 31, 2014).

50

Exhibit No.

Description

10.22

Form of Securities Purchase Agreement dated as of November 8, 2013, between the Company and Hillair Capital Investments, L.P. (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on November 14, 2013)

10.23

Form of Common Stock Purchase Warrant dated as of November 8, 2013, issued to Hillair Capital Investments, L.P. (incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K, filed with the SEC on November 14, 2013)

10.24

Form of Debenture dated as of November 8, 2013, issued to Hillair Capital Investments, L.P. (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K, filed with the SEC on November 14, 2013)

10.25

Form of Security Agreement dated as of November 8, 2013, between Hillair Capital Investments, L.P., the Company and certain of its subsidiaries (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed with the SEC on November 14, 2013)

10.25(a)

Form of Subsidiary Guarantee dated as of November 8, 2013, to the Securities Purchase Agreement, dated as of November 8, 2013, between the Company and Hillair Capital Investments, L.P. (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K, filed with the SEC on November 14, 2013)

10.26

Loan Agreement dated May 17, 2012 between HS Real Company, LLC and First Choice Medical Group of Brevard, LLC (incorporated by reference to Exhibit 10.29 to the Company’s Annual Report on Form 10-K, filed with the SEC on March 31, 2014).

10.26(a)

Promissory Note dated May 17, 2012, to HS Real Company, LLC (incorporated by reference to Exhibit 10.29(a) to the Company’s Annual Report on Form 10-K, filed with the SEC on March 31, 2014).

10.26(b)

Amendment to Loan Agreement dated August 5, 2012, with HS Real Company LLC, and First Choice Medical Group of Brevard, LLC (incorporated by reference to Exhibit 10.29(b) to the Company’s Annual Report on Form 10-K, filed with the SEC on March 31, 2014).

10.27

Employment Agreement dated March 20, 2014, between the Company and Christian Charles Romandetti (incorporated by reference to Exhibit 10.30 to the Company’s Annual Report on Form 10-K, filed with the SEC on March 31, 2014).

10.28

Operating and Control Agreement as of May 5, 2015, between the Company and Brevard Orthopaedic Spine & Pain Clinic, Inc.

10.29

Form of Common Stock Option Purchase dated as of May 5, 2015, issued to the principals of Brevard Orthopaedic Spine & Paine Clinic, Inc.

10.30

Modification Agreement, dated June 9, 2015, between the Company and C.T. Capital, LTD (incorporated by reference to Exhibit 10.1 on Form 8-K filed with the SEC on June 11, 2015).

10.31

Modification Agreement, dated December 14, 2015, between the Company and C.T. Capital, LTD (incorporated by reference to Exhibit 10.1 on Form 8-K filed with the SEC on December 18, 2015).

10.32

Membership Purchase Agreement effective October 1, 2015, by and
between Crane Creek Surgical Partners, LLC, CCSC Holdings, Inc., a wholly owned subsidiary of the Company, HMA Blue Chip
Investments, LLC and CCSC TBC Group, LLC (incorporated by reference to Exhibit 10.35 to the Form 10-K filed with the SEC on
April 14, 2016).

10.33

Second Amended and Restated Operating Agreement effective
October 1, 2015, between CCSC Holdings, Inc., a wholly owned subsidiary of the Company, HMA Blue Chip Investments, LLC
and CCSC TBC Group, LLC. (incorporated by reference to Exhibit 10.36 to the Form 10-K filed with the SEC on April 14,
2016).

51

Exhibit No.

Description

10.34

Asset Purchase Agreement between Marina Towers, LLC and Global Medical Reit, Inc. (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K, filed with the SEC on January 7, 2016).

10.35

Lease Agreement dated March 31, 2016, between GMR Melbourne, LLC and Marina Towers, LLC (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K, filed with the SEC on April 4, 2016).

10.36

Employment Agreement, dated May 27, 2016, between the Company and Timothy K. Skeldon (incorporated by reference to the Company’s Form 8-K filed with the SEC on July 6, 2016)

10.37

Warrant Purchase Agreement between First Choice Healthcare Solutions, Inc. and Hillair Capital Investments, LP. (incorporated by reference to Exhibit 10.1 to the Form 8-K filed with the Sec on November 15. 2016).

14

Code of Ethics, (incorporated by reference to Exhibit 14 to the Company’s Annual Report on Form 10-K, filed with the SEC on March 30, 2012)

21.1

List of Subsidiaries+

31.1

Certification of CEO pursuant to Sec. 302+

31.2

Certification of CFO pursuant to Sec. 302+

32.1

Certification of CEO pursuant to Sec. 906+

32.2

Certification of CFO pursuant to Sec. 906+

EX-101.INS

XBRL INSTANCE DOCUMENT+

EX-101.SCH

XBRL TAXONOMY EXTENSION SCHEMA DOCUMENT+

EX-101.CAL

XBRL TAXONOMY EXTENSION CALCULATION LINKBASE+

EX-101.DEF

XBRL TAXONOMY EXTENSION DEFINITION LINKBASE+

EX-101.LAB

XBRL TAXONOMY EXTENSION LABELS LINKBASE+

EX-101.PRE

XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE+

+filed herewith

52

SIGNATURES

In accordance with Section 13 or
15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

We have audited the accompanying
consolidated balance sheets of First Choice Healthcare Solutions, Inc. and subsidiaries (the “Company”) as of
December 31, 2016 and 2015, and the related consolidated statements of operations, equity and cash flows for each of the two
years in the period ended December 31, 2016. These consolidated financial statements are the responsibility of the
Company’s management. Our responsibility is to express an opinion on these consolidated financial statements and based
on our audits.

We conducted our audits in accordance with
the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company
is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits
included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate
in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control
over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable
basis for our opinion.

In our opinion, the consolidated financial
statements referred to above present fairly, in all material respects, the consolidated financial position of First Choice Healthcare
Solutions, Inc. and subsidiaries as of December 31, 2016 and 2015, and the consolidated results of their operations and their cash
flows for each of the two years in the period ended December 31, 2016, in conformity with U.S. generally accepted accounting principles.

Fair value of options issued to acquire management control of variable interest entity

$

—

$

3,226,427

Assets acquired from consolidation of variable interest entities

$

—

$

5,294,412

Liability incurred from consolidation of variable interest entities

$

—

$

5,294,680

See
the accompanying notes to these consolidated financial statements

F-7

NOTE 1— ORGANIZATION, BUSINESS AND PRINCIPLES OF CONSOLIDATION

A summary of the significant accounting policies
applied in the presentation of the accompanying consolidated financial statements follows:

Basis and business presentation

Effective
April 4, 2012, Medical Billing Assistance, Inc., a Colorado corporation (“Medical Billing”), merged with and
into the Company. The effect of the merger was that Medical Billing reincorporated from Colorado to Delaware (the
“Reincorporation”). The Company is deemed to be the successor issuer of Medical Billing under Rule 12g-3 of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”).

As a result of the Reincorporation, the Company
changed its name to First Choice Healthcare Solutions, Inc. and its shares under went an effective four-for-one reverse
split. Other than the foregoing, the Reincorporation did not result in any change in the business, management, fiscal year,
accounting, and location of the principal executive offices, assets or liabilities of the Company.

On April 2, 2012, the Company completed its
acquisition of First Choice Medical Group of Brevard, LLC (“First Choice – Brevard”), pursuant to the Membership
Interest Purchase Closing Agreement (the “Purchase Agreement”). The Company has been managing the practice of First
Choice – Brevard since November 1, 2011, pursuant to a Management Services Agreement.

Brevard
Orthopedic Spine & Pain Clinic, Inc.

Effective May 1, 2015, the Company, through
its wholly owned subsidiary, TBC Holdings of Melbourne, Inc., entered into an Operating and Control Agreement (the Agreement”)
with Brevard Orthopaedic Spine & Pain Clinic, Inc. (“The B.A.C.K. Center”), whereby we have sole and exclusive
management and control of The B.A.C.K. Center, including, but not limited to, administrative, financial, facility and business
operations including the requirement to absorb losses or right to receive economic benefits. We issued 3,000,000 options to purchase
our Company’s Common Stock at $1.35 per share with vesting contingent on The B.A.C.K. Center employees signing employment
contracts with First Choice - Brevard. The initial term of the Agreement relating to the options expired on December 31, 2016,
with the Company having the right to extend the term until December 31, 2023. We exercised our option to extend the term until
December 31, 2017.

The agreement allows the Company to hold the
current or potential rights that give it the power to direct the activities of the VIE that most significantly impact the VIE’s
economic performance, combined with a variable interest that gives the Company the right to receive potentially significant benefits
or the obligation to absorb potentially significant losses. The Company has a controlling financial interest in the VIE. Rights
held by others to remove the party with power over the VIE are not considered unless one party can exercise those rights unilaterally.
When changes occur to the structure of the entity, the Company will reconsider whether it is subject to the VIE model. The Company
continuously evaluates whether it has a controlling financial interest in the VIE.

Crane
Creek Surgery Center

Effective
October 1, 2015, the Company, through its recently formed wholly owned subsidiary, CCSC Holdings, Inc., acquired a 40% interest
in Crane Creek Surgery Center (“Crane Creek”) in exchange for an investment of $560,000 comprised of $140,000 cash
and a promissory note for $420,000, which bears 8% interest per annum, matures April 15, 2016 and was personally guaranteed by
the Company’s Chief Executive Officer. This note was paid in full on April 15, 2016. In connection with the investment, the
Company is entitled to 51% voting rights for all decisions that most significantly affect the economic performance of Crane Creek.
The 40% equity interest acquired entitles the Company to 40% of the profit or loss of Crank Creek.

Non-controlling interests relate to the third-party
ownership in a consolidated entity in which the Company has a controlling interest. For financial reporting purposes, the entity’s
assets, liabilities, and operations are consolidated with those of the Company, and the non-controlling interest in the entity
is included in the Company’s consolidated financial statements within the equity section of the consolidated Balance Sheets.

F-8

The consolidated
financial statements include the accounts of the Company and its direct and indirect wholly owned subsidiaries: Marina Towers,
LLC, FCID Medical Inc., TBC Holdings of Melbourne, Inc., First Choice – Brevard, Surgical Partners of Melbourne, Inc. and
CCSC Holdings, Inc., along with two VIE, The B.A.C.K. Center and Crane Creek. All significant intercompany balances and transactions,
including those involving the VIE, have been eliminated in consolidation.

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES

Use of estimates

The preparation of the financial statements in conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could
differ from those estimates. Significant estimates include the recoverability and useful lives of long-lived assets, provision
against bad debt, the fair value of the Company’s stock, and stock-based compensation. Actual results may differ from
these estimates.

Revenue recognition

The Company recognizes revenue in accordance
with Accounting Standards Codification subtopic 605-10, “Revenue Recognition” (“ASC 605-10”), which
requires that four basic criteria be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2)
delivery has occurred; (3) the selling price is fixed or determinable; and (4) collectability is reasonably assured. Determination
of criteria (3) and (4) are based on management’s judgments regarding the fixed nature of the selling prices of the products
delivered and the collectability of those amounts. Provisions for discounts and rebates to customers, estimated returns and allowances,
and other adjustments are provided for in the same period the related sales are recorded.

ASC 605-10 incorporates Accounting Standards
Codification subtopic 605-25, “Multiple-Element Arrangements” (“ASC 605-25”). ASC 605-25 addresses
accounting for arrangements that may involve the delivery or performance of multiple products, services and/or rights to use assets.
The effect of implementing ASC 605-25 on the Company’s financial position and results of operations was not significant.

The Company recognizes in accordance with Accounting
Standards Codification subtopic 954-310, “Health Care Entities” (“ASC 954-310”), significant patient service
revenue at the time the services are rendered, even though it does not assess the patient’s ability to pay. Therefore, The
Company’s interim and annual periods reports disclose both, its policy for assessing and disclosing the timing and amount
of uncollectable patient service revenue recognized as doubtful. Qualitative and quantitative information about significant changes
in the allowance for doubtful accounts related to patient accounts receivable are disclosed in the Company’s reports. These
estimates are based upon the history and identified trends for each of our payers.

Patient service revenue

The Company recognizes patient service revenue
associated with services provided to patients who have third-party payer coverage on the basis
of contractual rates for the services provided. For uninsured or self-pay patients that do not qualify for charity care, the Company
recognizes revenue on the basis of its standard rates for services provided (or on the basis of discounted rates, if negotiated
or provided by policy). On the basis of historical experience, a portion of the Company’s patient service revenue may
be potentially uncollectible due to patients who are unable or unwilling to pay for the services provided or the portion of their
bill for which they are responsible. Thus, the Company records a provision for bad debts related to potentially uncollectible patient
service revenue in the period the services are provided.

F-9

Rental revenue

FCID Holdings had one real estate holding,
Marina Towers, a Class A 78,000 square foot, six-story building located on the Indian River in Melbourne, Florida. The address
is 709 South Harbor City Boulevard, Melbourne, Florida 32901. In addition to housing our corporate headquarters and First Choice
Medical Group, the building, which averages 95% annual occupancy, also leases 38,334 square feet of commercial office
space to non-affiliated tenants. Our corporate headquarters and FCID Holdings offices currently utilize
4,274 square feet on the fifth floor of Marina Towers; and First Choice Medical Group, including its MRI center and Physical
Therapy center, currently occupies 21,902 square feet on the ground, first and second floors. Until March 2016, Marina
Towers was owned by Marina Towers, LLC, a subsidiary owned by FCID Holdings (99%) and MTMC of Melbourne, Inc. (1%), both wholly
owned subsidiaries of the Company. In September 2016, both FCID Holdings and MTMC of Melbourne were dissolved and Marina Towers,
LLC became wholly owned by First Choice Healthcare Solutions, Inc.

On
March 31, 2016, we completed the sale of Marina Towers to Global Medical REIT Inc. for a purchase price of $15.45 million. In
addition, Marina Towers, LLC leased back the entire facility via a 10-year absolute triple-net master lease agreement that
will expire in 2026 and be renewable for two five-year periods on the same terms and conditions as the primary lease term
with the exception of rent, which will be adjusted to the prevailing market rent at renewal and will escalate in successive
years during the extended lease period.

Until Marina Towers’ sale on March 31,
2016, the Company recognized rental revenue associated with the period the facility is leased at the contractual lease rates (or
on the basis of discounted rates, if negotiated).

In addition, TBC subleases approximately
29,629 square feet of commercial office space to affiliated and non-affiliated tenants, including 18,828 square feet to Crane
Creek Surgery Center (“CCSC”), located at 2222 South Harbor City Boulevard, Melbourne, Florida 32901, which is also
TBC’s main medical practice location.

Cash

Cash consists of cash held in bank demand
deposits. The Company considers all highly liquid instruments with original maturities of three months or less to be cash
equivalents. As of December 31, 2016, the Company had $4,593,638 cash, of which $708,858 was held by VIE. As of December 31, 2015,
the Company had $1,594,998 cash, of which $1,556,303 was held by VIE.

Concentrations of credit risk

The Company’s financial instruments that
are exposed to a concentration of credit risk are cash and accounts receivable. Occasionally, the Company’s cash and cash
equivalents in interest-bearing accounts may exceed FDIC insurance limits. The financial stability of these institutions is periodically
reviewed by senior management.

Accounts receivables

Accounts receivables are carried at their
estimated collectible amounts net of doubtful accounts. The Company analyzes its history and identifies trends for each major
payer sources of revenue to estimate the appropriate allowance for doubtful accounts and provision for bad debts. Management regularly
reviews data about these major payer sources of revenue in evaluating the sufficiency of the allowance for doubtful accounts.

F-10

●

Rental receivables. Accounts receivables from rental activities are periodically evaluated for collectability in determining the appropriate allowance for doubtful account and provision of bad debts.

●

Patient receivables. Accounts receivables from services provided to patients who have third-party coverage, the Company analyzes contractually due amounts and provides a provision for bad debts, if necessary. The Company records a provision for bad debts in the period of service on the basis of past experience or when indications are the patients are unable or unwilling to pay the portion of their bill for which they are responsible. The difference between the standard rates (or the discounted rates if negotiated) and the amounts actually collected after all reasonable collection efforts have been exhausted, is charged off against the allowance for doubtful accounts.

As of December 31, 2016 and December 31, 2015,
the Company’s provision for bad debts was $3,680,837 and $2,498,398, respectively.

Segment information

Accounting Standards Codification subtopic
“Segment Reporting” 280-10 (“ASC 280-10”) establishes standards for reporting information regarding
operating segments in annual financial statements and requires selected information for those segments to be presented in interim
financial reports issued to stockholders. ASC 280-10 also establishes standards for related disclosures about products and services
and geographic areas. Operating segments are identified as components of an enterprise about which separate discrete financial
information is available for evaluation by the chief operating decision maker, or decision-making group, in making decisions how
to allocate resources and assess performance. The information disclosed herein represents all of the material financial information
related to the Company’s principal operating segments. (See Note 18 – Segment Reporting).

Patents

Intangible assets with finite lives are amortized
over their estimated useful lives. Intangible assets with indefinite lives are not amortized, but are tested for impairment annually.
The Company’s intangible assets with finite lives are patent costs, which are amortized over their economic or legal life,
whichever is shorter. These patent costs were acquired on September 7, 2013 by the issuance of 636,666 shares of the Company’s
common stock to a related party. The shares of common stock were valued at $286,500, which was estimated to be approximately the
fair value of the patent acquired and did not materially differ from the fair value of the common stock. The amortization for the
year ended December 31, 2016 and 2015 was $19,100 and $19,100, respectively. Accumulated amortizations of Patent costs were $57,300
and $38,200 at December 31, 2016 and 2015, respectively.

Patient list

Patient list is comprised of acquired patients
in connection with the acquisition of First Choice - Brevard and is amortized ratably over the estimated useful life of 15 years.
The amortization for the year ended December 31, 2016 and 2015 was $20,000 and $20,000, respectively. Accumulated amortization
of patient list costs was $95,000 and $75,000 at December 31, 2016 and 2015, respectively.

Long-lived assets

The Company follows FASB ASC 360-10-15-3, “Impairment
or Disposal of Long-lived Assets,” which established a “primary asset” approach to determine the cash flow estimation
period for a group of assets and liabilities that represents the unit of accounting for a long-lived asset to be held and used.
Long-lived assets to be held and used are reviewed for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. The carrying amount of a long-lived asset is not recoverable if it exceeds
the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. Long-lived assets
to be disposed of are reported at the lower of carrying amount or fair value less cost to sell.

F-11

Property and equipment are stated at cost.
When retired or otherwise disposed, the related carrying value and accumulated depreciation are removed from the respective accounts
and the net difference less any amount realized from disposition, is reflected in earnings. For financial statement purposes, property
and equipment are recorded at cost and depreciated using the straight-line method over their estimated useful lives of 20 to 39
years.

The Company evaluates the recoverability of
long-lived assets based upon forecasted undiscounted cash flows. Should impairment in value be indicated, the carrying value of
intangible assets will be adjusted, based on estimates of future discounted cash flows resulting from the use and ultimate disposition
of the asset. ASC 360-10 also requires assets to be disposed of is reported at the lower of the carrying amount or the fair value
less costs to sell.

At December 31, 2016, the Company management
performed an evaluation of its goodwill and other acquired intangible assets for purposes of determining the implied fair value
of the assets at December 31, 2016. The test indicated that the recorded remaining book value of its goodwill in connection with
the consolidation of Crane Creek did not exceed its fair value for the year ended December 31, 2016. Considerable management judgment
is necessary to estimate the fair value. Accordingly, actual results could vary significantly from management’s estimates.

Net
income (loss) per share

The Company
computes basic net income per share by dividing net income per share available to common stockholders by the weighted average number
of common shares outstanding for the period and excludes the effects of any potentially dilutive securities. Diluted earnings per
share, if presented, would include the dilution that would occur upon the exercise or conversion of all potentially dilutive securities
into common stock using the “treasury stock” and/or “if converted” methods as applicable. The computation
of basic and diluted income per share for the year ended December 31, 2016 and 2015 excludes potentially dilutive securities when
their inclusion would be anti-dilutive, or if their exercise prices were greater than the average market price of the common stock
during the period.

Potentially
dilutive securities excluded from the computation of basic and diluted net income (loss) per share are as follows:

2016

2015

Convertible notes and line of credit

800,000

2,566,888

Warrants to purchase common stock

1,875,000

4,324,630

Options to purchase common stock

3,000,000

3,000,000

Restricted stock awards

660,000

—

Totals

6,335,000

9,891,518

Stock-based compensation

The Company measures the cost of services received
in exchange for an award of equity instruments based on the fair value of the award. For employees and directors, the fair value
of the award is measured on the grant date and for non-employees, the fair value of the award is generally re-measured on vesting
dates and interim financial reporting dates until the service period is complete. The fair value amount is then recognized over
the period during which services are required to be provided in exchange for the award, usually the vesting period. Stock-based
compensation expense is recorded by the Company in the same expense classifications in the consolidated statements of operations,
as if such amounts were paid in cash.

F-12

Deferred costs

On May 1, 2015, in connection with the Operation
and Control Agreement with Brevard Orthopaedic Spine & Pain Clinic, Inc. (“The B.A.C.K. Center”), the Company
reserved 3,000,000 options to purchase the Company’s common stock at $1.35 per share, expiring on December 31, 2023 and
vesting is contingent on The B.A.C.K. Center employees executing employment agreements with First Choice-Brevard. The determined fair value of $3,226,427, determined using the Black Scholes option
pricing model with the following assumptions: Dividend yield: 0%; Volatility: 134.09% and Risk free rate: 2.12%, is amortized
ratably to operations over an estimated 8.67-year life. The amortization for the year ended December 31, 2016 and 2015 was $322,644
and $215,096, respectively. Accumulated amortization of the deferred costs was $537,740 and $215,096 at September 30, 2016 and
December 31, 2015, respectively.

Investments

The Company has adopted Accounting Standards
Codification subtopic 323-10, Investments-Equity Methods and Joint Ventures (“ASC 323-10), which requires the accounting
for investments where the Company can exert significant influence, but not control of a joint venture or equity investment. The
Company owned a 0.6660% interest in a non-consolidated affiliate, Doctor’s Surgical Partnership, LTD. In accordance with
the equity method of accounting, investments in non-consolidated affiliates are carried at cost and adjusted for the Company’s
proportionate share of their undistributed earnings or losses.

Income taxes

The Company recognizes deferred tax assets
and liabilities for the expected future tax consequences of items that have been included or excluded in the financial statements
or tax returns. Deferred tax assets and liabilities are determined on the basis of the difference between the tax basis of assets
and liabilities and their respective financial reporting amounts (“temporary differences”) at enacted tax rates in
effect for the years in which the temporary differences are expected to reverse.

The Company adopted the provisions of Accounting
Standards Codification (“ASC”) Topic 740-10, which prescribes a recognition threshold and measurement process for financial
statement recognition and measurement of a tax position taken or expected to be taken in a tax return.

Management has evaluated and concluded that
there were no material uncertain tax positions requiring recognition in the Company’s consolidated financial statements
as of December 31, 2016 and 2015. The Company does not expect any significant changes in its unrecognized tax benefits
within twelve months of the reporting date.

The Company’s policy is to classify assessments,
if any, for tax related interest as interest expense and penalties as general and administrative expenses in the consolidated statements
of operations.

F-13

Fair value

Accounting Standards Codification subtopic
825-10, Financial Instruments (“ASC 825-10”) requires disclosure of the fair value of certain financial instruments.
ASC 825-10 defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities
required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it
would transact and considers assumptions that market participants would use when pricing the asset or liability, such as inherent
risk, transfer restrictions, and risk of nonperformance. ASC 825-10 establishes a fair value hierarchy that requires an entity
to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 825-10 establishes
three levels of inputs that may be used to measure fair value:

Level 2 - Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities.

●

Level 3 - Unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities.

To the extent that valuation is based on models
or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. In certain
cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure
purposes, the level in the fair value hierarchy within which the fair value measurement is disclosed and is determined based on
the lowest level input that is significant to the fair value measurement.

The carrying value of the Company’s
cash, accounts receivable, accounts payable, short-term borrowings (including lines of credit and notes payable), and other current
assets and liabilities approximate fair value because of their short-term maturity.

As of December 31, 2016 and 2015, the Company
did not have any items that would be classified as level 1, 2 or 3 disclosures.

Recent accounting pronouncements

There are other updates recently issued, most
of which represented technical corrections to the accounting literature or application to specific industries and are not expected
to a have a material impact on the Company’s financial position, results of operations or cash flows.

Subsequent events

The Company evaluates events that have occurred
after the balance sheet date but before the financial statements are issued. Based upon the evaluation, the Company did not identify
any recognized or non-recognized subsequent events that would have required adjustment or disclosure in the consolidated financial
statements, except as disclosed.

NOTE 3 – LIQUIDITY

The Company incurred various non-recurring
expenses in 2016 in connection with the planned development of its Healthcare Services Business. Management believes continued
growth of earnings before interest, taxes, depreciation and amortization in 2017 will support improved liquidity.

F-14

On June
13, 2013, the Company’s subsidiary, First Choice – Brevard entered into a loan and security agreement with C.T. Capital,
Ltd., d/b/a C.T. Capital, LP, a Florida limited liability partnership for an accounts receivable line of credit in the maximum aggregate
amount of $1,500,000. Under the line of credit with C.T. Capital, the Company reduced the annual interest rate from 12% per annum
to 6% per annum in exchange for the issuance to C.T. Capital of 100,000 restricted shares of the Company’s common stock. On
June 9, 2015, First Choice – Brevard entered into a modification agreement amending the loan and security agreement, increasing
the maximum aggregate amount available from $1,500,000 to $2,000,000 and on December 14, 2015, increasing the maximum aggregate
available from $2,000,000 to $2,500,000 and extending the maturity date to July 30, 2017 in exchange for 100,000 restricted shares
of the Company’s common stock.

On
March 30, 2017, the Company’s Loan and Security Agreement with C.T. Capital, Ltd. (“Lender”) was amended to extend
the Maturity Date to June 30, 2018 (the “Loan”) and further provide that neither the Company nor Lender shall effectuate
any conversion of the Loan to the extent that after giving effect to any such conversion, the Lender would beneficially own in
excess of 9.99% of the number of shares of our Company’s shares of Common Stock outstanding immediately after giving effect
to the issuance of shares of Common Stock issuable upon conversion of the Loan by the Lender.

The $500,000
increase may be repaid at any time, and is not subject to the conversion provision set forth in the loan agreement. All other
terms and conditions of the loan agreement remain in full force and effect. As of December 31, 2016, the Company had used
$1,100,000 of the amount available under the line of credit. (See Note 8 – Lines of Credit).

Up until its sale and leaseback on March 31,
2016, Marina Towers, a 78,000 square foot, Class A, six-story building located on the Indian River in Melbourne, Florida, was
owned by our wholly owned subsidiaries, FCID Holdings, Inc. (“FCID Holdings”), which held 99% ownership, and MTMC
of Melbourne, Inc., which held 1% ownership. On March 31, 2016, we completed the sale of Marina Towers to Global Medical REIT
Inc. for a purchase price of $15.45 million. In addition, our wholly owned subsidiary, Marina Towers, LLC, leased back the entire
facility via a 10-year absolute triple-net master lease agreement that will expire in 2026 and be renewable for two five-year
periods on the same terms and conditions as the primary lease term with the exception of rent, which will be adjusted to the prevailing
market rent at renewal and will escalate in successive years during the extended lease period. In September 2016, both FCID Holdings
and MTMC of Melbourne were dissolved and Marina Towers, LLC became wholly owned by First Choice Healthcare Solutions, Inc.
Marina Towers subleases 38,334 square feet of commercial office space to non-affiliated tenants.

In addition, TBC subleases 29,629 square
feet of commercial office space to affiliated and non-affiliated tenants, including 18,828 square feet to Crane Creek Surgery
Center (“CCSC”), located at 2222 South Harbor City Boulevard, Melbourne, Florida 32901, which is also TBC’s
main medical practice location.

The Company
believes that the current positive cash balance, along with continued execution of its business development plan, will allow the
Company to further improve its working capital; and currently anticipates that it will have sufficient capital resources to meet
projected cash flow requirements through the date that is one year and one day from the filing of this report.

However,
in order to execute the Company’s business development plan, which there can be no assurance we will achieve, the Company
may need to raise additional funds through public or private equity offerings, debt financings, corporate collaborations or other
means and potentially reduce operating expenditures. If the Company is unable to secure additional capital, it may be required
to curtail its business development initiatives and take additional measures to reduce costs in order to conserve its cash.

NOTE 4 — CASH – RESTRICTED

Cash-restricted
was comprised of funds deposited to and held by the mortgage lender for payments of property taxes, insurance, replacements and
major repairs of the Company’s commercial building. The majority of the restricted funds are reserved for tenant improvements.
As of December 31, 2015, the Company had $359,414 in restricted cash. In conjunction with the sale of Marina Towers (see Note 5)
in March 2016, any remaining restricted cash was returned to operating funds.

F-15

NOTE 5 — PROPERTY, PLANT, AND EQUIPMENT

Property, plant and equipment at December 31, 2016 and 2015 are
as follows:

2016

2015

Land

$

—

$

1,000,000

Building

—

3,055,168

Building improvements

185,213

4,211,749

Computer equipment

370,561

340,065

Medical equipment

2,940,055

2,822,027

Office equipment

214,206

260,141

3,710,035

11,689,150

Less: accumulated depreciation

(1,165,219

)

(3,075,648

)

$

2,544,816

$

8,613,502

During the year ended December 31, 2016 and
2015, depreciation expense charged to operations was $459,965 and $598,789, respectively.

During
the year ended December 31, 2016, the Company sold equipment for proceeds of $45,000, recognizing a gain on sale of equipment
of $18,879.

Sale/Leaseback

On March
31, 2016, the Company sold Marina Towers, a 78,000 square-foot medical office building for a purchase price of $15.45 million to
Global Medical REIT Inc. The acquisition includes the site and building, an easement on the adjacent property to the north for
surface parking, all tenant leases, and above and below ground garages (the “Property”).

The entire facility was leased back to Marina
Towers, LLC, a wholly owned subsidiary of the Company, via a 10-year absolute triple-net master lease agreement that expires in
2026. The Company has two successive options to renew the lease for five-year periods on the same terms and conditions as the primary
non-revocable lease term with the exception of rent, which will be adjusted to the prevailing fair market rent at renewal and will
escalate in successive years during the extended lease period. The Company does not have any residual interest nor the option to
repurchase the facility at the end of the lease term.

F-16

The lease is classified as an operating lease
and as such recorded a gain on sale of property of $9,188,968 during the year ended December 31, 2016.

The following is a schedule of future minimum
lease payments for the non-cancelable operating lease for each of the next five years ending December 31 and thereafter:

Year ended December 31, 2017

$

1,104,675

Year ended December 31, 2018

1,121,245

Year ended December 31, 2019

1,143,670

Year ended December 31, 2020

1,166,543

Year ended December 31, 2021 and thereafter

6,515,730

$

11,051,863

For the
year ended December 31, 2016, the Company collected $1,167,409 in net rental revenue from third-party tenants of Marina Towers.

NOTE 6 — OTHER ASSETS

Other assets are comprised of the following:

2016

2015

Goodwill (amount relating to VIE of $899,465)

$

899,465

$

899,465

Deferred costs, net of amortization of $537,740 and $215,096

2,688,687

3,011,331

Patient list, net of accumulated amortization of $95,000 and $75,000

205,000

225,000

Patents, net of accumulated amortization of $57,300 and $38,200

229,200

248,300

Investments (amounts related to VIE of $22,005 and $16,914)

22,005

16,914

Deferred tax asset

181,029

—

Deposits

2,571

2,571

Total other assets

$

4,227,957

$

4,403,581

NOTE 7 — ADVANCES

At December 31, 2016 and 2015, the Company
received an aggregate of $-0- and $43,082, respectively, as cash advances from non-related parties. The advances are due upon demand
with an interest rate of 12% per annum. All advances were repaid in April 2016.

F-17

NOTE 8 — LINES OF CREDIT

Line of credit, C.T. Capital

On June 13, 2013, the Company’s subsidiary,
First Choice – Brevard entered into a loan and security agreement (the “Loan Agreement”) with C.T. Capital, Ltd.,
d/b/a C.T. Capital, LP, a Florida limited liability partnership (the “Lender”). Under the Loan Agreement, the Lender
committed to make an accounts receivable line of credit in the maximum aggregate amount of $1,500,000 to First Choice - Brevard
with an interest rate of 12% per annum (the “Loan”). The maturity date of the Loan is December 31, 2016. Interest
is due and payable monthly. Upon default, the interest may be adjusted to the highest rate permissible by law. The Loan is secured
by the accounts receivable and assets of the Company’s subsidiary, First Choice – Brevard, which constitute the collateral
for the repayment of the Loan. The Loan Agreement also includes covenants, representations, warranties, indemnities and events
of default that are customary for facilities of this type. The advance rate is defined as: 80% of all receivables to be 120 days
or less at the net collection rate of approximately 27% of total billings, excluding patient billings and collections. Additionally,
allowable accounts receivable will also include 50% of all accounts receivable protected by legal letters of protection. At any
time up until December 31, 2016, the Lender may convert all or any portion of the outstanding principal amount or interest on
the Loan into common stock of the Company at a conversion price of $0.75 per share. The Company did not record an embedded beneficial
conversion feature in the note since the fair value of the common stock did not exceed the conversion rate at the date of commitment.

On November
8, 2013, in consideration for the issuance of 100,000 restricted shares of the Company’s common stock, the Lender agreed
to modify its Loan. Under the Loan Agreement, as amended, the annual rate of interest of the Loan was reduced from 12% per annum
to 6% per annum and will remain at 6% until November 1, 2015. All other terms under the Loan Agreement remain the same.

On June 9, 2015, First Choice – Brevard
and the Lender entered into a Modification Agreement (“Modification”) further amending the Loan Agreement dated June
13, 2013, thereby increasing the Company’s accounts receivable line of credit from $1,500,000 to $2,000,000. All the other
terms and conditions of the Loan Agreement, as amended, remain in full force and effect.

On December 14, 2015, First Choice-Brevard
entered into a Modification Agreement (“Modification”) amending the Loan and Security Agreement dated June 13, 2013.
The Modification Agreement increased the Company’s accounts receivable line of credit from $2,000,000 to $2,500,000 and
extended the maturity date of the Loan Agreement to June 30, 2017 (“Maturity Date”). In addition, the Company agreed
to maintain an outstanding balance of not less than $1,000,000 until the Maturity Date (“Minimum Borrowing”) and provide
sixty (60) days prior written notice to prepay up to $1,000,000 of the outstanding indebtedness in excess of the Minimum Borrowing.
All of the other terms and conditions of the Loan Agreement remain in full force and effect.

In consideration of the $500,000 increase
in the accounts receivable line of credit, the Company issued the Lender 100,000 shares of its common stock, valued at $92,000.
The $500,000 increase may be repaid by the Company at any time, and is not subject to the conversion provisions set forth in the
Loan Agreement. The shares were accrued for as of December 31, 2015 and issued in the current quarter.

The obligations of the Company under the Loan
Agreement, as amended, are guaranteed by certain affiliates of the Company, including a personal guarantee issued by the
Company’s Chief Executive Officer.

As of
December 31, 2016 and 2015, the outstanding balance was $1,100,000 and $2,150,000, respectively. At December 31, 2016, the Company
was obligated, but had not issued, 1,866,677 shares of its common stock in exchange for $1,400,000 in convertible debt.

On March 30, 2017, the Company’s
Loan and Security Agreement with C.T. Capital, Ltd. (“Lender”) was amended to extend the Maturity Date to June 30, 2018
(the “Loan”) and further provide that neither the Company nor Lender shall effectuate any conversion of the Loan to
the extent that after giving effect to any such conversion, the Lender would beneficially own in excess of 9.99% of the number
of shares of our Company’s shares of Common Stock outstanding immediately after giving effect to the issuance of shares
of Common Stock issuable upon conversion of the Loan by the Lender. (See Note 22 – Subsequent Events)

F-18

Line of credit, Florida Business Bank

On June 27, 2012, The B.A.C.K. Center entered
into a Promissory Note (the “Loan Agreement”) with Florida Business Bank, a Florida banking corporation (the “Lender”).
Under the Loan Agreement, the Lender committed to make an accounts receivable line of credit in the maximum aggregate amount of
$1,000,000, with an interest rate of Prime floating plus 1.0%, as published in The Wall Street Journal, with a floor of
4.50% per annum (the “Loan”).

The Loan was modified on April 9, 2013, allowing
a temporary increase to $1,383,000 and allowing for a one-time draw of up to $995,000 to be distributed to the shareholders for
the purposes of financing the capitalization of TBC Equipment Leasing, LLC. The one-time draw was repaid within 45 days and the
availability under the Loan returned to $1,000,000. The modification allows for an interest rate of one month Libor floating plus
2.75%, as published in The Wall Street Journal, with a floor of 2.96% per annum.

Interest shall be due and payable monthly
and principal is due on demand. The outstanding principal balance plus all accrued but unpaid interest shall be due on demand
(the “Maturity Date”). Upon default, the interest may be adjusted to the highest rate permissible by law.

The Loan is secured by all assets of The B.A.C.K.
Center now owned or hereafter acquired. The assets constitute the collateral for the repayment of the Loan.

The Loan Agreement also includes covenants,
representations, warranties, indemnities and events of default that are customary for facilities of this type. The advance rate
is defined as: 60% of eligible accounts receivables. Eligible receivables include all Medicare and Medicaid receivables less than
90 days old multiplied by a factor of 0.25, plus all other receivables less than 90 days old multiplied by a factor of 0.50. As
of December 31, 2016, The B.A.C.K. Center had not violated the loan covenants.

The obligations of The B.A.C.K Center under
the Loan Agreement are guaranteed by the shareholders of The B.A.C.K. Center. The Loan Agreement is also guaranteed in the amount
of $950,000 by related parties of The B.A.C.K. Center. As of December 31, 2016 and 2015, the outstanding balance on the Loan was
$439,524 and $416,888, respectively.

NOTE 9 — SETTLEMENT PAYABLE

On November 2, 2015, the Company and MedTRX
Collection Services, Inc. signed a settlement and mutual release agreement, whereby the parties have agreed to settle all disputes
and the pending arbitration actions and release each other from all claims, counterclaims, liabilities and obligations, except
for obligations stipulated in the settlement or as otherwise reserved.

The settlement terms provided for the Company
to pay MedTRX cash consideration of $500,000 upon signing of the settlement agreement, $650,000 cash paid over time in accordance
with the terms and conditions of two non-interest bearing promissory notes – one for $550,000 and one for $100,000 –
and 400,000 shares of the Company’s Common Stock.

In connection with the settlement, on November
6, 2015, the Company issued 400,000 shares of its Common Stock, valued at $1.15 per share, and two non-interest bearing promissory
notes in aggregate of $650,000, due the earlier of a) April 2, 2016, b) the date real estate (as identified) is sold, financed
or transferred or c) date the stock payment (as described above) is redeemed. As of December 31, 2015, the balance due on outstanding
settlement promissory notes was $600,000. However, the Company paid the notes in full on April 1, 2016.

F-19

The Company charged an aggregate of $2,017,208
as litigation settlement expenses for the year ended December 31, 2015 inclusive of legal fees incurred.

Colin
Halpern, a former member of our Board of Directors, is the Managing Member of MedTRX Provider Network, LLC, which is an affiliate
of MedTRX. He received 35,000 shares of Common Stock as part of the settlement.

NOTE 10 — NOTE PAYABLE, RELATED PARTY

Effective October 1, 2015, the Company acquired
a 40% interest in Crane Creek Surgery Center (“Crane Creek”) in exchange for an investment of $560,000 comprised of
$140,000 cash and a promissory note for $420,000 which bears 8% interest per annum, matures April 15, 2016 and is personally guaranteed
by the Company’s Chief Executive Officer. The promissory note was issued to certain equity owners of The
B.A.C.K. Center, an entity consolidated with the Company under VIE accounting. The outstanding principal and interest at December
31, 2016 and 2015 was $-0- and $428,645, respectively. This note was paid in full on April 15, 2016.

NOTE
11 - CONVERTIBLE NOTES PAYABLE

Hillair
Capital Investments

On November
8, 2013, the Company entered into a securities purchase agreement (the “Securities Purchase Agreement”) with Hillair
Capital Investments L.P. (“Hillair”) in exchange for the issuance of (i) a $2,320,000, 8% original issue discount convertible
debenture, which was originally due on December 28, 2013 and subsequently extended on December 28, 2013 through November 1, 2015
(the “Debenture”), and (ii) a common stock purchase warrant (the “Warrant”) to purchase up to 2,320,000
shares of the Company’s common stock at an exercise price of $1.35 per share, which may be exercised on a cashless basis,
until November 8, 2018. The Debenture and the Warrant may not be converted if such conversion would result in Hillair beneficially
owning in excess of 4.99% of the Company’s common stock. Hillair may waive this 4.99% restriction with 61 days’ notice
to the Company.

The Company
issued to Hillair the Debenture with the Warrant for the net purchase price of $2,000,000 (reflecting the $320,000 original issue
discount of the Debenture). Until the Debenture is no longer outstanding, the Debenture is convertible, in whole or in part at
the option of Hillair, into shares of common stock, subject to certain conversion limitations set forth above at a conversion price
of $1.00 per share, subject to adjustment for stock splits, stock dividends, and sales of securities or other distributions by
the Company.

In connection
with the issuance of the Debenture, the Company issued the Warrant, granting the holder the right to acquire an aggregate of 2,320,000
shares of the Company’s common stock at $1.35 per share. In accordance with ASC 470-20, the Company recognized the value
attributable to the Warrant and the conversion feature of the Debenture in the amount of $1,871,117 to additional paid-in capital
and a discount against the notes. The Company valued the warrants in accordance with ASC 470-20 using the Black-Scholes pricing
model and the following assumptions: contractual terms of 3.6 years, an average risk free interest rate of 1.42%, a dividend yield
of 0%, and volatility of 147.94%. During the year ended December 31, 2013, the Company amortized $1,871,117 of the debt discount
to operations as interest expense.

On January 30, 2015, the Company and Hillair
entered into an Extension Agreement (“Extension”) amending the 8% Original Issue Discount Secured Convertible Debenture
due November 1, 2015, in order to extend the Periodic Redemption due February 1, 2015, in the principal amount of $580,000 (the
“February Periodic Redemption”) to April 1, 2015.

In consideration
of the Extension, the Company issued to Hillair 100,000 shares of common stock valued at $99,000 and remitted a payment of $30,000.
The Extension also provides that, for an additional $20,000 payment (provided written notice and payment are made prior to March
15, 2015), the Company may request that the February Periodic Redemption be extended to May 1, 2015.

F-20

On March
15, 2015, the Company provided written notice and remitted $20,000 to Hillair to extend the February Redemption to May 1, 2015.

On April
9, 2015, the redemption terms of the Debenture were further modified as follows: Hillair agreed to convert $580,000 of the principal
amount of the February Periodic Redemption into 580,000 shares of the Company’s common stock on or before May 1, 2015. In
consideration of reducing the conversion price of $100,000 principal amount of the Debenture from $1.00 to $0.50 per share, the
$580,000 principal amount of the Debenture due May 1, 2015 was extended to August 1, 2015.

As a result
of the modification, Hillair converted $100,000 principal amount of the Debenture, at $0.50 per share, into 200,000 shares of the
Company’s common stock; and $580,000 principal amount of the February Periodic Redemption, at $1.00 per share, into 580,000
shares of the Company’s common stock. In total, Hillair converted $680,000 principal amount of the Debenture into 780,000
shares of the Company’s common stock. As a result of the transaction, the Company recorded the fair value of the 100,000
additional common shares issued of $128,000 as current period interest expense.

In July
2015 and August 2015, the Company issued an aggregate of 1,425,707 shares of common stock in full settlement of the outstanding
convertible note payable and related accrued interest in the aggregate amount of $1,425,707.

C.T.
Capital, Ltd.

On June
13, 2013, the Company’s subsidiary, First Choice – Brevard entered into a loan and security agreement (the “Loan
Agreement”) with C.T. Capital, Ltd., d/b/a C.T. Capital, LP, a Florida limited liability partnership (the
“Lender”). Under the Loan Agreement, the Lender committed to make an accounts receivable line of credit in the maximum
aggregate amount of $1,500,000 to First Choice - Brevard with an interest rate of 12% per annum (the “Loan”). The
maturity date of the Loan is December 31, 2016. Interest is due and payable monthly. Upon default, the interest may be adjusted
to the highest rate permissible by law. The Loan is secured by the accounts receivable and assets of the Company’s subsidiary,
First Choice – Brevard, which constitute the collateral for the repayment of the Loan. The Loan Agreement also includes
covenants, representations, warranties, indemnities and events of default that are customary for facilities of this type. The
advance rate is defined as: 80% of all receivables to be 120 days or less at the net collection rate of approximately 27% of total
billings, excluding patient billings and collections. Additionally, allowable accounts receivable will also include 50% of all
accounts receivable protected by legal letters of protection. At any time up until December 31, 2016, the Lender may convert all
or any portion of the outstanding principal amount or interest on the Loan into common stock of the Company at a conversion price
of $0.75 per share. The Company did not record an embedded beneficial conversion feature in the note since the fair value of the
common stock did not exceed the conversion rate at the date of commitment.

On November 8, 2013, in consideration for the issuance of 100,000 restricted shares of the Company’s common stock, the
Lender agreed to modify its Loan. Under the Loan Agreement, as amended, the annual rate of interest of the Loan was reduced
from 12% per annum to 6% per annum and will remain at 6% until November 1, 2015. All other terms under the Loan Agreement
remain the same.

On June 9, 2015, First Choice – Brevard and the Lender entered into a Modification Agreement (“Modification”)
further amending the Loan Agreement dated June 13, 2013, thereby increasing the Company’s accounts receivable line of
credit from $1,500,000 to $2,000,000. All the other terms and conditions of the Loan Agreement, as amended, remain in full
force and effect.

F-21

On December 14, 2015, First Choice-Brevard entered into a Modification Agreement (“Modification”)
amending the Loan and Security Agreement dated June 13, 2013. The Modification Agreement increased the Company’s accounts
receivable line of credit from $2,000,000 to $2,500,000 and extended the maturity date of the Loan Agreement to June 30, 2017
(“Maturity Date”). In addition, the Company agreed to maintain an outstanding balance of not less than $1,000,000
until the Maturity Date (“Minimum Borrowing”) and provide sixty (60) days prior written notice to prepay up to
$1,000,000 of the outstanding indebtedness in excess of the Minimum Borrowing. All of the other terms and conditions of the
Loan Agreement remain in full force and effect.

In consideration of the $500,000 increase in the accounts receivable line
of credit, the Company issued the Lender 100,000 shares of its common stock, valued at $92,000. The $500,000 increase may
be repaid by the Company at any time, and is not subject to the conversion provisions set forth in the Loan Agreement. The
shares were accrued for as of December 31, 2015 and issued in the current quarter.

On March 30, 2017, the Company’s
Loan and Security Agreement with C.T. Capital, Ltd. (“Lender”) was amended to extend the Maturity Date to June 30,
2018 (the “Loan”) and further provide that neither the Company nor Lender shall effectuate any conversion of the
Loan to the extent that after giving effect to any such conversion, the Lender would beneficially own in excess of 9.99% of
the number of shares of our Company’s shares of Common Stock outstanding immediately after giving effect to the issuance
of shares of Common Stock issuable upon conversion of the Loan by the Lender. (See Note 22 – Subsequent Events)

The
obligations of the Company under the Loan Agreement, as amended, are guaranteed by certain affiliates of the Company, including
a personal guarantee issued by the Company’s Chief Executive Officer.

As of December 31, 2016 and 2015, the outstanding
balance was $1,100,000 and $2,150,000, respectively. At December 31, 2016, the Company was obligated, but had not issued,
1,866,677 shares of its common stock in exchange for $1,400,000 in convertible debt.

NOTE 12— NOTES PAYABLE

Notes payable as of December 31, 2016 and 2015 are comprised of
the following:

2016

2015

Mortgage Payable

$

—

$

7,153,262

Note Payable, GE Capital (MRI)

438,736

844,098

Note Payable, GE Capital (X-ray)

48,362

97,232

Note Payable, GE Arm

41,043

67,455

Capital Lease Equipment

5,842

26,716

533,983

8,188,763

Less current portion

(519,452

)

(7,652,941

)

$

14,531

$

535,822

Mortgage payable

On August 12, 2011, the Company refinanced
its existing mortgage note payable providing additional working capital funds. The aggregate amount of the note of $7,550,000
with 6.10% interest per annum with monthly payments of $45,753 beginning in October 2011 based on a 30-year amortization schedule
with all remaining principal and interest due in full on September 16, 2016. The note is secured by land and the building along
with first priority assignment of leases and rents. In connection with the sale/leaseback transaction (See Note 5), the Company
paid off the outstanding balance on March 31, 2016.

F-22

Note payable — equipment financing

On May 21, 2012, the Company entered into a
note payable with GE Healthcare Financial Services (“GE Capital”) in the amount of approximately $2.4 million for equipment
financing.

On September 27, 2012, the Company accepted
the delivery of MRI equipment under the equipment finance lease. As such, the component price accepted of $1,771,390 is due over
60 months and the associated monthly payment is $0 for the first three months and $38,152 per month for the remaining 57 months
including interest at 7.9375% per annum. On March 8, 2013, the Company amended the equipment finance lease to interest only payments
of $11,779 for the first three months and $38,152 per month for the remaining monthly payments.

On August 22, 2012, the Company accepted the
delivery of X-ray equipment under the equipment finance lease. As such, the component price accepted of $212,389 is due over 60
months and the associated monthly payment is $0 for the first three months and $4,300 per month for the remaining 57 months including
interest at 7.9375% per annum. On March 8, 2013, the Company amended the equipment finance lease to interest only payments of $1,384
for the first three months and $4,575 per month for the remaining monthly payments.

On February 25, 2013, the Company accepted
the delivery of C-arm equipment under the equipment finance lease. As such, the component price accepted of $124,797 is due over
63 months and the associated monthly payment is $0 for the first three months and $2,388 for the remaining 60 months, including
interest at 7.39% per annum.

Capital leases — equipment

On June 11, 2013, the Company entered into
a lease agreement to acquire equipment with 48 monthly payments of $956 payable through June 1, 2017 with an effective interest
rate of 14.002% per annum. The Company may elect to acquire the leased equipment at a nominal amount at the end of the lease.

On October 25, 2011, The B.A.C.K. Center entered
into a lease agreement to acquire equipment with 60 monthly payments of $1,036 payable through October 26, 2016, with no stated
interest rate. The B.A.C.K. Center may elect to acquire the leased equipment at a nominal amount at the end of the lease. The lease
was paid in full in 2016.

Aggregate principal maturities of long-term debt as of December
31, 2016:

Amount

Year ended December 31, 2017

$

519,452

Year ended December 31, 2018

14,531

Total

$

533,983

NOTE 13 — RELATED PARTY TRANSACTIONS

The Company’s President and shareholders
have advanced funds to the Company for working capital purposes since the Company’s inception. No formal repayment terms
or arrangements exist and the Company is not accruing interest on these advances. As of December 31, 2016 and 2015, all advances
had been repaid.

F-23

Effective October 1, 2015, the Company acquired
a 40% interest in Crane Creek Surgery Center (“Crane Creek”) in exchange for an investment of $560,000 comprised of
$140,000 cash and a promissory note for $420,000 which bears 8% interest per annum, matures April 15, 2016 and is personally guaranteed
by the Company’s Chief Executive Officer. The promissory note was issued to certain equity owners of The
B.A.C.K. Center, an entity consolidated with the Company under VIE accounting. This note was paid in full on April 15, 2016.

As of March 31, 2016, the Company received
an aggregate of $133,796 as cash advances from related parties. The advances were due upon demand with an interest rate of 12%
per annum. On April 6, 2016, the Company paid the advances in full.

NOTE 14 — CAPITAL STOCK

Preferred stock

The Company is authorized to issue 1,000,000
shares $0.01 par value preferred stock. As of December 31, 2016 and 2015, none was issued and outstanding.

Common stock

The Company is authorized to issue 100,000,000
shares of $0.001 par value common stock. As of December 31, 2016 and 2015, and 24,631,327 and 22,867,626 shares were issued and
outstanding, respectively.

During the year ended December 31, 2015, the
Company issued an aggregate of 200,000 shares of its common stock in connection with a loan extension, valued at $227,000. (see
Note 10 – Convertible Notes Payable).

During the year ended December 31, 2015, the
Company issued an aggregate of 2,236,907 shares of its common stock in exchange for conversion of notes payable of $2,120,000 and
$116,907 accrued interest.

During the year ended December 31, 2015, the
Company issued an aggregate of 485,486 shares of its common stock in exchange for previous advances of $615,500 and $39,907 accrued
interest.

During the year ended December 31, 2015, the
Company issued an aggregate of 1,559,178 shares of its common stock to officers, employees and service providers at an aggregate
fair value of $1,683,776, of which $221,000 was expensed in 2014.

During the year ended December 31, 2015, the
Company issued 400,000 shares of its common stock as part of a settlement agreement (See Note 8-Settlement Payable) at a fair value
of $460,000.

During the year ended December 31, 2015, the
Company issued 35,000 shares of its common stock as payment of services of a previous board of director member at a fair value
of $40,250.

During the year ended December 31, 2015, the
Company issued 485,486 shares of its common stock in settlement of previous related party advances and accrued interest of $655,407.

During the year ended December 31, 2015, the
Company sold 129,630 shares of common stock to an investor for an aggregate purchase price of $175,000. The investor also received
a five-year warrant to purchase 129,630 shares of the Company’s common stock at an exercise price of $1.35 per share. The
shares were subsequently issued in 2016.

F-24

During the year ended December 31, 2016, the
Company issued an aggregate of 100,000 shares of its common stock in connection with an increase in credit line, valued at $92,000,
which was expensed in 2015. (See Note 8 – Lines of Credit)

During the year ended December 31, 2016, the
Company issued an aggregate of 1,474,071 shares of its common stock to officers, employees and service providers at an aggregate
fair value of $1,289,485, of which $1,198,900 was expensed in 2015.

During the year ended December 31, 2016, the
Company issued 60,000 shares of its common stock to re-acquire warrants previously issued in connection with the sale of common
stock. (See Note 15 – Stock Options, Warrants and Restricted Stock Units).

At December 31, 2016, the Company was obligated,
but had not issued, 1,866,667 shares of its common stock in exchange for $1,400,000 in convertible debt.

Stock-based payable

At December
31, 2015, the Company was obligated to issue an aggregate of 1,217,071 shares of its common stock to officers and consultants
for past and future services. The estimated liability as of December 31, 2015 of $1,198,900 ($0.85 per share) was determined based
on services rendered in 2015 and were subsequently issued in 2016. The shares were issued in reliance upon the exemption
from registration under Section 4(a)(2) of the Securities Act.

NOTE 15 — STOCK OPTIONS, WARRANTS
AND RESTRICTED STOCK UNITS

Options

The following table presents information related to stock options
at December 31, 2016:

Effective May 1, 2015, the Company, through
its wholly owned subsidiary, TBC Holdings of Melbourne, Inc., entered into an Operating and Control Agreement (the Agreement”)
with Brevard Orthopaedic Spine & Pain Clinic, Inc. (“The B.A.C.K. Center”), whereby we have sole and exclusive
management and control of The B.A.C.K. Center, including, but not limited to, administrative, financial, facility and business
operations including the requirement to absorb losses or right to receive economic benefits. We issued 3,000,000 options to purchase
our Company’s Common Stock at $1.35 per share with vesting contingent on The B.A.C.K. Center employees signing employment
contracts with First Choice - Brevard. The determined fair value of $3,226,427, determined using the Black Scholes option
pricing model with the following assumptions: Dividend yield: 0%; Volatility: 134.09% and Risk free rate: 2.12%, is amortized
ratably to operations over an estimated 8.67-year life; and is recorded as deferred costs and amortized over the contract term
of the Operating and Control Agreement of the VIE.

Warrants

The following table summarizes the warrants
outstanding and the related exercise prices for the underlying shares of the Company’s common stock as of December 31, 2016:

On November 2, 2015, the Company issued 129,630
warrants to purchase the Company’s common stock at $1.35 per share for five years in connection with the sale of the Company’s
common stock.

On November 15, 2016, the Company re-acquired
2,320,000 warrants to acquire the Company’s common stock at an exercise price of $1.35 for a cash payment of $600,000. The
determined fair value of the warrant at exchange date of $841,134, determined using the Black Scholes option pricing model with
the following assumptions: Dividend yield: 0%; Volatility: 72.0% and Risk free rate: 0.61%, and remaining life of 1.98 years.

On December
27, 2016, the Company re-acquired 129,630 warrants to acquire the Company’s common stock at an exercise price of $1.35 in
exchange for 60,000 shares of the Company’s common stock. The determined fair value of the warrant at exchange date of $89,949,
determined using the Black Scholes option pricing model with the following assumptions: Dividend yield: 0%; Volatility: 70.6%
and Risk free rate: 0.89%, and remaining life of 3.85 years.

Restricted Stock
Units (“RSU”)

The following table summarizes the restricted
stock activity for the 12 months ended December 31, 2016:

F-27

Restricted share units as of December 31, 2014

—

Granted

—

Forfeited

—

Restricted shares units issued as of December 31, 2015

—

Granted

660,000

Forfeited

—

Total Restricted Shares Issued at December 31, 2016

660,000

Vested at December 31, 2016

—

Unvested restricted shares as of December 31, 2016

660,000

On
May 31, 2016, the Company granted 150,000 performance-based, restricted stock units vesting over three years based on the achievement
of certain defined annual financial benchmarks, pursuant to terms of employment offered to the Company’s newly appointed
Chief Financial Officer, effective July 11, 2016. The estimated fair value of the granted restricted stock units of $156,000 will
be recognized over the vesting period(s).

In
2016, the Company granted an aggregate of 510,000 restricted stock units vesting three years from the date of issuance. The estimated
fair value of the granted restricted stock units of $527,700 will be recognized over the vesting period(s).

The fair value of all restricted stock units
vesting during the year ended December 31, 2016 and 2015 of $131,546 and $-0-, respectively, was charged to current period operations.

As of December 31, 2016, stock-based compensation
related to restricted stock awards of $552,154 remains unamortized and is expected to be amortized over the weighted average remaining
period of 2.38 years.

NOTE 16 — VARIABLE INTEREST ENTITY

Brevard Orthopaedic Spine & Pain Clinic,
Inc.

Effective May 1, 2015, the Company, through
its wholly owned subsidiary, TBC Holdings of Melbourne, Inc., entered into an Operating and Control Agreement (the Agreement”)
with Brevard Orthopaedic Spine & Pain Clinic, Inc. (“The B.A.C.K. Center”), whereby we have sole and exclusive
management and control of The B.A.C.K. Center, including, but not limited to, administrative, financial, facility and business
operations including the requirement to absorb losses or right to receive economic benefits. We issued 3,000,000 options to purchase
our Company’s Common Stock at $1.35 per share with vesting contingent on The B.A.C.K. Center employees signing employment
contracts with First Choice – Brevard. The initial term of the Agreement relating to the options expired on December 31,
2016, with the Company having the right to extend the term until December 31, 2023. We exercised our option to extend the term
until December 31, 2017.

F-28

The Company
has determined that The B.A.C.K. Center is a Variable Interest Entity (“VIE”) in accordance with Financial Accounting
Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 810, “Consolidation”.
In evaluating whether the Company has the power to direct the activities of a VIE that most significantly impact its economic performance,
the Company considers the purpose for which the VIE was created, the importance of each of the activities in which it is engaged
and the Company’s decision-making role, if any, in those activities that significantly determine the entity’s economic
performance as compared to other economic interest holders.

This evaluation requires consideration of all
facts and circumstances relevant to decision-making that affects the entity’s future performance and the exercise of professional
judgment in deciding which decision-making rights are most important.

In determining whether the Company has the
right to receive benefits or the obligation to absorb losses that could potentially be significant to the VIE, the Company evaluates
all of its economic interests in the entity, regardless of form (debt, equity, management and servicing fees, and other contractual
arrangements). This evaluation considers all relevant factors of the entity’s structure, including: the entity’s capital
structure, contractual rights to earnings (losses), subordination of our interests relative to those of other investors, contingent
payments, as well as other contractual arrangements that have potential to be economically significant.

The evaluation of each of these factors in
reaching a conclusion about the potential significance of the Company’s economic interests is a matter that requires the
exercise of professional judgment. The assets of The B.A.C.K. Center can only be used to settle obligations of the VIE, additionally,
creditors of The B.A.C.K. Center do not have recourse against the general credit of the primary beneficiary.

The tables below summarize the assets and liabilities
associated with The B.A.C.K. Center as of December 31, 2016 and 2015:

2016

2015

Current assets:

Cash

$

355,491

$

996,986

Accounts receivable

4,830,054

3,727,419

Other current assets

691,847

819,757

Total current assets

5,877,392

5,544,162

Property and equipment, net

70,444

60,978

Other assets

22,005

18,231

Total assets

$

5,969,841

$

5,623,371

F-29

2016

2015

Current liabilities:

Accounts payable and accrued liabilities

$

904,684

$

1,877,690

Due to First Choice Healthcare Solutions, Inc.

2,867,539

1,729,882

Other current liabilities

677,446

427,229

Total current liabilities

4,449,669

4,034,801

Long term debt

1,658,858

1,727,256

Total liabilities

6,108,527

5,762,057

Non-controlling interest

(138,686

)

(138,686

)

Total liabilities and deficit

$

5,969,841

$

5,623,371

Total revenues from The B.A.C.K. Center were
$14,022,604 for the year ended December 31, 2016. Related expenses consisted primarily of salaries and benefits of $6,588,842,
general and administrative expenses of $6,523,334, depreciation of $24,451, interest and financing costs of $14,714; and other
income of $268,543 for the year ended December 31, 2016. (See Note 18 – Segment Reporting)

Total revenues from The B.A.C.K. Center were
$9,789,366 from May 1, 2015 through December 31, 2015. Related expenses consisted primarily of salaries and benefits of $4,084,312,
general and administrative expenses of $3,928,244, depreciation of $18,404 and interest and financing costs of $28,524. (See Note
18 – Segment Reporting)

Crane
Creek Surgery Center

Effective
October 1, 2015, the Company, through its then newly formed wholly owned subsidiary, CCSC Holdings, Inc., acquired a 40%
interest in Crane Creek Surgery Center (“Crane Creek”) in exchange for an investment of $560,000 comprised of $140,000
cash and a promissory note for $420,000 which bore 8% interest per annum, matures April 15, 2016 and was personally guaranteed
by the Company’s Chief Executive Officer. The promissory note was paid in full on April
15, 2016.

In connection with the investment, the Company
is entitled to 51% voting rights for all decisions that most significantly affect the economic performance of Crane Creek. The
40% equity interest acquired entitles the Company to 40% of the profit or loss of Crank Creek.

The Company has determined that Crane Creek
is a Variable Interest Entity (“VIE”) in accordance with Financial Accounting Standards Board (“FASB”)
Accounting Standards Codification (“ASC”) Topic 810, “Consolidation”. In evaluating whether the
Company has the power to direct the activities of a VIE that most significantly impact its economic performance, the Company considers
the purpose for which the VIE was created, the importance of each of the activities in which it is engaged and the Company’s
decision-making role, if any, in those activities that significantly determine the entity’s economic performance as compared
to other economic interest holders.

F-30

This evaluation requires consideration of all
facts and circumstances relevant to decision-making that affects the entity’s future performance and the exercise of professional
judgment in deciding which decision-making rights are most important.

In determining whether the Company has the
right to receive benefits or the obligation to absorb losses that could potentially be significant to the VIE, the Company evaluates
all of its economic interests in the entity, regardless of form (debt, equity, management and servicing fees, and other contractual
arrangements). This evaluation considers all relevant factors of the entity’s structure, including: the entity’s capital
structure, contractual rights to earnings (losses), subordination of our interests relative to those of other investors, contingent
payments, as well as other contractual arrangements that have potential to be economically significant. The evaluation of each
of these factors in reaching a conclusion about the potential significance of the Company’s economic interests is a matter
that requires the exercise of professional judgment.

The assets of Crane Creek can only be used
to settle obligations of the VIE, additionally, creditors of the Crane Creek do not have recourse against the general credit of
the primary beneficiary.

The tables
below summarize the assets and liabilities associated with the Crane Creek as of December 31, 2016 and 2015:

2016

2015

Current assets:

Cash

$

353,367

$

559,318

Accounts receivable

1,180,907

816,889

Other current assets

129,430

—

Total current assets

1,663,704

1,376,207

Property and equipment, net

623,185

712,830

Goodwill

899,465

899,465

Total assets

$

3,186,354

$

2,988,502

F-31

2016

2015

Current liabilities:

Accounts payable and accrued liabilities

$

461,489

$

441,368

Other current liabilities

251,588

251,588

Total current liabilities

713,077

692,956

Deferred rent

556,051

532,752

Total liabilities

1,269,128

1,225,708

Equity-First Choice Healthcare Solutions, Inc.

766,891

705,118

Non-controlling interest

1,150,335

1,057,676

Total liabilities and deficit

$

3,186,354

$

2,988,502

Total revenues from Crane Creek were $5,076,724
for the year ended December 31, 2016. Related expenses consisted primarily of salaries and benefits of $1,219,749, practice supplies
and operating expenses of $3,123,964, general and administrative expenses of $491,678, depreciation of $112,595, gain on sale of
equipment of $18,878 and miscellaneous income of $6,815 for the year ended December 31, 2016. (See Note 18 – Segment Reporting)

Total revenues from the Crane Creek were $1,124,797
from October 1, 2015 through December 31, 2015. Related expenses consisted primarily of salaries and benefits of $311,450,
practice supplies and operating of $287,349, general and administrative expenses of $111,009, depreciation of $55,749 and miscellaneous
income of $3,554. (See Note 18 – Segment Reporting)

NOTE 17 — NON-CONTROLLING INTEREST

Effective
May 1, 2015, the Company, through its wholly owned subsidiary, TBC Holdings of Melbourne, Inc., entered into an Operating and
Control Agreement (the Agreement”) with Brevard Orthopaedic Spine & Pain Clinic, Inc. (“The B.A.C.K. Center”),
whereby we have sole and exclusive management and control of The B.A.C.K. Center, including, but not limited to, administrative,
financial, facility and business operations including the requirement to absorb losses or right to receive economic benefits.
We issued 3,000,000 options to purchase our Company’s Common Stock at $1.35 per share with vesting contingent on The B.A.C.K.
Center employees signing employment contracts with First Choice – Brevard. The initial term of the Agreement relating to
the options expired on December 31, 2016, with the Company having the right to extend the term until December 31, 2023. We exercised
our option to extend the term until December 31, 2017.

F-32

A reconciliation of the non-controlling income
attributable to the Company:

Net loss attributable to non-controlling interest
for the year ended December 31, 2016:

Net income

$

1,139,806

Average Non-controlling interest percentage of profit/losses

-0-

%

Net income attributable to the non-controlling interest

$

-0-

Net loss attributable to non-controlling interest
for the period ended December 31, 2015:

Net income

$

1,919,690

Average Non-controlling interest percentage of profit/losses

-0-

%

Net income attributable to the non-controlling interest

$

-0-

The following
table summarizes the changes in non-controlling interest from May 1, 2015 to December 31, 2016:

Balance, May 1, 2015

$

(138,686

)

Transfer (to) from the non-controlling interest as a result of change in ownership

Net income attributable to the non-controlling interest

Balance, December 31, 2015

(138,686

)

Transfer (to) from the non-controlling interest as a result of change in ownership

—

Net income attributable to the non-controlling interest

—

Balance, December 31, 2016

$

(138,686

)

Effective
October 1, 2015, the Company, through its wholly owned subsidiary, CCSC Holdings, Inc., acquired a 40% interest in Crane
Creek Surgery Center (“Crane Creek”) in exchange for an investment of $560,000 comprised of $140,000 cash and a promissory
note for $420,000 which bears 8% interest per annum, matures April 15, 2016 and is personally guaranteed by the Company’s
Chief Executive Officer. This promissory note was paid in full on April 15, 2016. In connection with the investment, the Company
is entitled to 51% voting rights for all decisions that most significantly affect the economic performance of Crane Creek. The
40% equity interest acquired entitles the Company to 40% of the profit or loss of Crank Creek.

F-33

A reconciliation of the non-controlling income attributable to the
Company:

Net income attributable to non-controlling
interest for the year ended December 31, 2016:

Net income

$

154,431

Average Non-controlling interest percentage of profit/losses

60

%

Net income/loss attributable to the non-controlling interest

$

92,659

Net income attributable to non-controlling
interest for the period from October 1, 2015 to December 31, 2015:

Net income

$

362,794

Average non-controlling interest percentage of profit/losses

60

%

Net income/loss attributable to the non-controlling interest

$

217,676

The following table summarizes
the changes in non-controlling interest from October 1, 2015 to December 31, 2016:

Balance, October 1, 2015

$

840,000

Transfer (to) from the non-controlling interest as a result of change in ownership

—

Net income attributable to the non-controlling interest

217,676

Balance, December 31, 2015

1,057,676

Transfer (to) from the non-controlling interest as a result of change in ownership

—

Net income attributable to the non-controlling interest

92,659

Balance, December 31, 2016

$

1,150,335

NOTE 18 — SEGMENT REPORTING

The Company reports segment information based
on the “management” approach. The management approach designates the internal reporting used by management for making
decisions and assessing performance as the source of the Company’s reportable segments. The Company has three reportable
segments: FCID Medical, Inc., The B.A.C.K. Center and CCSC Holdings, Inc. (“CCSC”).

All reportable
segments derive revenue for medical services provided to patients; and The B.A.C.K Center additionally derives revenue for subleasing
space within its building and medical services provided to patients. With the aforementioned sale and leaseback of Marina Towers
on March 31, 2016, the Company will no longer report segmented rental revenue received from third-party Marina Tower tenants under
the segment heading “Marina Towers.” Rather, the Company has consolidated rental revenue received from third-party
tenants of Marina Towers under the “Corporate” segment for both the 2016 and 2015 comparable reporting periods; and
will continue to do so hereafter.

F-34

Information concerning the operations of the
Company’s reportable segments is as follows:

Summary Statement of Operations for the year
ended December 31, 2016:

The

FCID

B.A.C.K.

Intercompany

Medical

Center

CCSC

Corporate

Eliminations

Total

Revenue:

Net patient service revenue

$

9,357,077

$

12,619,389

$

5,076,724

$

—

$

—

$

27,053,190

Rental revenue

—

1,403,215

1,739,646

(731,969

)

2,410,892

Total revenue

9,357,077

14,022,604

5,076,724

1,739,646

(731,969

)

29,464,082

Operating expenses:

Salaries & benefits

3,487,594

6,588,842

1,219,749

1,274,213

—

12,570,398

Other operating expenses

2,175,409

—

3,123,964

1,345,251

(731,969

)

5,912,655

General and administrative

1,579,283

6,231,741

491,678

1,716,965

—

10,019,667

Depreciation and amortization

272,968

24,451

112,595

411,695

—

821,709

Total operating expenses

7,515,254

12,845,034

4,947,986

4,748,124

(731,969

)

29,324,429

Net income (loss) from operations:

1,841,823

1,177,570

128,738

(3,008,478

)

—

139,653

Interest income (expense)

(216,149

)

(13,397

)

(10,087

)

(103,528

)

—

(343,161

)

Amortization of financing costs

—

(1,317

)

—

(14,337

)

—

(15,654

)

Gain on sale of property

—

—

18,878

9,188,968

—

9,207,846

Other income (expense)

—

268,543

6,815

3,000

—

278,358

Net income before income taxes:

1,625,674

1,431,399

144,344

6,065,625

—

9,267,042

Income taxes

—

—

—

—

Net income

1,625,674

1,431,399

144,344

6,065,625

—

9,267,042

Non-controlling interest

—

—

(92,659

)

—

—

(92,659

)

Net income attributable to First Choice Healthcare Solutions

$

1,625,674

$

1,431,399

$

51,685

$

6,065,625

$

—

$

9,174,383

F-35

Summary Statement of Operations for the year
ended December 31, 2015:

The

FCID

B.A.C.K.

Intercompany

Medical

Center

CCSC

Corporate

Eliminations

Total

Revenue:

Net patient service revenue

$

7,537,761

$

9,108,139

$

1,124,797

$

—

$

—

$

17,770,697

Rental revenue

—

681,227

1,558,083

(492,343

)

1,746,967

Total revenue

7,537,761

9,789,366

1,124,797

1,558,083

(492,343

)

19,517,664

Operating expenses:

Salaries & benefits

3,421,210

4,084,312

311,450

1,520,768

—

9,337,740

Other operating expenses

1,861,195

—

287,349

443,367

(492,343

)

2,099,568

General and administrative

1,246,383

3,738,436

111,009

2,048,710

—

7,144,538

Litigation settlement

401,958

—

—

1,615,250

—

2,017,208

Depreciation and amortization

266,025

18,404

55,749

512,807

—

852,985

Total operating expenses

7,196,771

7,841,152

765,557

6,140,902

(492,343

)

21,452,039

Net income (loss) from operations:

340,990

1,948,214

359,240

(4,582,819

)

—

(1,934,375

)

Interest income (expense)

(243,531

)

(20,621

)

(10,545

)

(946,283

)

—

(1,220,980

)

Amortization of financing costs

(10,582

)

(7,903

)

—

(57,348

)

—

(75,833

)

Other income (expense)

—

—

3,554

23,469

—

27,023

Net income (loss) before income taxes:

86,877

1,919,690

352,249

(5,562,981

)

—

(3,204,165

)

Income taxes

—

—

—

—

Net income (loss)

86,877

1,919,690

352,249

(5,562,981

)

—

(3,204,165

)

Non-controlling interest

—

—

(217,676

)

—

—

(217,676

)

Net income (loss) attributable to First Choice Healthcare Solutions

$

86,877

$

1,919,690

$

134,573

$

(5,562,981

)

$

—

$

(3,421,841

)

F-36

Selected financial data:

FCID

The B.A.C.K.

Intercompany

Medical

Center

CCSC

Corporate

Eliminations

Total

Assets:

At December 31, 2016:

$

6,033,019

$

5,995,253

$

3,186,354

$

6,931,468

$

—

$

22,146,094

At December 31, 2015:

$

4,391,192

$

5,623,370

$

3,013,011

$

9,596,415

$

—

$

22,623,988

Assets acquired:

Year ended December 31, 2016

$

126,314

$

33,918

$

44,572

$

49,823

$

—

$

254,627

Year ended December 31, 2015

$

23,837

$

44,696

$

78,447

$

59,345

$

—

$

206,325

NOTE 19 - COMMITMENTS AND CONTINGENCIES

Employment agreement with Christian Romandetti,
CEO

The Company entered a formal five-year employment
agreement (the “Employment Agreement”) with Christian “Chris” Romandetti, dated March 20, 2014 and effective
January 1, 2014, to serve as the Company’s President and Chief Executive Officer. Pursuant to the terms and conditions set
forth in the Employment Agreement, Mr. Romandetti is entitled to receive an annual base salary of $250,000, which shall increase
no less than 5% per annum for the term of the Employment Agreement.

Mr. Romandetti, upon successfully achieving
annual revenue milestones, is entitled to receive a bonus equal to 10% of his salary when $7.1 million in total annual revenue
is reported in a fiscal year scaling up to a bonus equal to 800% of his salary if and when $100 million in total annual revenue
is reported in a fiscal year. Mr. Romandetti signed a waiver and consent to the bonus earned for 2016. If the Company
is unable to pay any portion of the bonus compensation when due because of insufficient liquidity or applicable restrictions under
prevailing debt financing agreements, then, as an accommodation to the Company, Mr. Romandetti shall be able to convert bonus
compensation into shares of the Company’s common stock at a 30% discount to the average closing price during the first calendar
month after the end of the fiscal year. Mr. Romandetti will also be entitled to receive a strategic bonus of $100,000, payable
in cash, on the sixth month anniversary of opening each new center of excellence.

Pursuant to the Company achieving specific financial
performance benchmarks established by the Board of Directors, Mr. Romandetti will also be entitled to receive a cashless option
to purchase up to one million shares of common stock per year. The exercise price of the options will be the fair market value
of the average closing price of the stock during the first calendar month after the end of the fiscal year. Mr. Romandetti shall
have up to five years from the date of the annual option grant to exercise the option. In addition to the above compensation consideration,
Mr. Romandetti will be entitled to receive annual restricted stock compensation equal to 100% of the total base salary and bonus
compensation. The fair market value of the restricted stock grant shall be determined using the average closing price of the common
stock during the first calendar month after the end of the fiscal year. Mr. Romandetti signed a waiver and consent to the bonus
earned for 2016.

In addition,
Mr. Romandetti’s Employment Agreement provides that, upon Mr. Romandetti’s death, disability, termination for any reason
other than “Cause” (as such term is defined in the Employment Agreement) or resignation for “Good Reason”
(as such term is defined in the Employment Agreement), the Company will pay to Mr. Romandetti 12 months of his annual base salary
at the time of separation in accordance with the Corporation’s usual payroll practices.

F-37

Employment agreement with Timothy K. Skeldon,
CFO

The Company entered into an Employment Agreement
with Mr. Timothy K. Skeldon, the Company’s Chief Financial officer, effective July 11, 2016, whereby Mr. Skeldon receives
an annual salary of $250,000 and an additional annual bonus of $25,000 per year for each completed year of employment. Further,
Mr. Skeldon was granted a total of 150,000 shares of the Company’s Common Stock with a three-year vesting schedule.
Up to 50,000 shares per year are eligible to vest based on annual revenue and EBITDA benchmarks agreed upon by Mr. Skeldon and
the Company. Shares will be issued on a percentage of actual amounts achieved. Mr. Skeldon will also be eligible to participate
in the Company’s health and other benefits on the same terms as other Company executives.

Employee
employment contracts

The Company,
from time to time, enters into employment contracts with its physicians. These contracts are generally for a three
(3) year term; may be terminated for “Cause,” as defined therein; include customary provisions for restrictive covenants;
and provide for compensation that is derived from the revenue generated by work performed by the physicians. As of December 31,
2016, the Company has entered into approximately thirteen (13) physician employment agreements.

Litigation – Health First Management

The B.A.C.K. Center (“TBC”)
has had a claim filed in Brevard County, Florida Circuit Court against Health First Management, Inc. (“Health First”)
due to a contract dispute that predates our Company’s involvement with TBC. The dispute is currently in advanced settlement
discussions. Irrespective of the settlement outcome, our Company will not receive any settlement fees nor will we be subject to
paying any settlement fees.

From time to time, we may become involved
in lawsuits and legal proceedings which arise in the ordinary course of business, including potential disputes with patients.
However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time
to time that may harm our business.

Operating leases

The B.A.C.K. Center

The B.A.C.K. Center leases office space under
various non-cancelable operating leases that expire at various dates through June 2026. Terms of the lease agreements provide for
rental payments ranging from approximately $4,200 to $200,000 per month. Certain leases include charges for sales and real estate
taxes and a proration of common area maintenance expenses. Under generally accepted accounting principles (GAAP), all rental payments,
including fixed rent increases, are recognized on a straight-line basis over the life of the lease. The GAAP-based rent expense
and the actual lease payments are reflected as deferred rent on the accompanying balance sheet.

The following is a schedule of future minimum
lease payments for all non-cancelable operating leases for each of the next five years ending December 31 and thereafter:

Year ended December 31, 2017

$

3,444,197

Year ended December 31, 2018

3,444,209

Year ended December 31, 2019

3,444,221

Year ended December 31, 2020

3,444,233

Year ended December 31, 2021 and thereafter

17,221,415

$

30,998,275

For the year ended December 31, 2016, The
B.A.C.K. Center collected $1,403,215 in net rental revenue from affiliated and non-affiliated tenants, including Crane Creek Surgery
Center.

F-38

Sale/Leaseback

Effective March 31, 2016, the Company leased
Marina Towers under a sale/leaseback transaction (See Note 4), via a 10-year absolute triple-net master lease agreement that expires
in 2026. The Company has two successive options to renew the lease for five-year periods on the same terms and conditions as the
primary non-revocable lease term with the exception of rent, which will be adjusted to the prevailing fair market rent at renewal
and will escalate in successive years during the extended lease period. The Company does not have any residual interest nor the
option to repurchase the facility at the end of the lease term.

Under generally accepted accounting principles
(GAAP), all rental payments, including fixed rent increases, are recognized on a straight-line basis over the life of the lease.
The GAAP-based rent expense and the actual lease payments are reflected as deferred rent on the accompanying balance sheet.

The following is a schedule of future minimum
lease payments for the non-cancelable operating lease for each of the next five years ending December 31 and thereafter:

Year ended December 31, 2017

$

1,104,675

Year ended December 31, 2018

1,121,245

Year ended December 31, 2019

1,143,670

Year ended December 31, 2020

1,166,543

Year ended December 31, 2021 and thereafter

6,515,730

$

11,051,863

For the year ended December 31, 2016, the Company
collected $1,167,409 in net rental revenue from third party tenants of Marina Towers.

Crane Creek Surgery Center

The Crane Creek Surgery Center leases office
space under an operating lease that expires in 2024. Terms of the lease agreement provide for rental payments ranging from approximately
$76,293 to $92,114 per month. The office space lease includes charges for sales and real estate taxes and a proration of common
area maintenance expenses. Under generally accepted accounting principles (GAAP), all rental payments, including fixed rent increases,
are recognized on a straight-line basis over the life of the lease. The GAAP-based rent expense and the actual lease payments
are reflected as deferred rent on the accompanying balance sheet.

The following is a schedule of future minimum
lease payments for the operating lease for each of the next five years ending December 31 and thereafter:

Year ended December 31, 2017

$

930,373

Year ended December 31, 2018

955,888

Year ended December 31, 2019

981,850

Year ended December 31, 2020

1,008,537

Year ended December 31, 2021 and thereafter

3,653,868

$

7,530,516

F-39

Guarantees

The B.A.C.K. Center’s shareholders and
a related party have guaranteed the full and prompt payment of the base rent, the additional rent and any all other sums and charges
payable by a tenant, its successors and assigns under the lease, and the full performance and observance of all the covenants,
terms, conditions and agreements for one of the above mentioned operating leases.

NOTE 20 — INCOME (LOSS) PER SHARE

The following table presents the computation of basic and diluted
loss per share:

2016

2015

Net income (loss) available for common
shareholders

$

9,174,383

$

(3,421,841

)

Basic net income (loss) per share

$

0.38

$

(0.17

)

Weighted average common shares outstanding-basic

23,843,239

20,117,582

Diluted net income (loss) share

$

0.36

$

(0.14

)

Weighted average common shares outstanding-Diluted

23,309,905

20,117,582

During
the year ended December 31, 2015, common stock equivalents are not considered in the calculation of the weighted average number
of common shares outstanding because they would be anti-dilutive, thereby decreasing the net loss per common share.

NOTE 21 - INCOME TAXES

The Company has adopted Accounting Standards
Codification subtopic 740-10, Income Taxes (“ASC 740-10”) which requires the recognition of deferred tax liabilities
and assets for the expected future tax consequences of events that have been included in the financial statement or tax returns.
Under this method, deferred tax liabilities and assets are determined based on the difference between financial statements and
tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.
Temporary differences primarily include stock compensation and other equity-related non-cash charges, capitalized financing costs,
the basis difference of derivative liabilities and certain accruals.

Due to the reverse acquisition of First Choice
Healthcare Solutions, Inc. by FCID Holdings, Inc. on December 29, 2010, the net operating loss carry forwards of First Choice Healthcare
Solutions, Inc. incurred prior to that date may not be useable for income tax purposes. As through September 30, 2010 FCID Holdings,
Inc. was inactive, and FCID Holdings, Inc.’s active subsidiary is a limited liability company and through September 30, 2010
passed no income through to FCID Holdings, Inc. for federal and state income tax purposes, FCID Holdings, Inc. through September
30, 2010 incurred no income tax at the corporate level.

In the first quarter of 2016, effective March
31, 2016, the Company sold and leased back Marina Towers under a sale/leaseback transaction (See “Gain on Sale of Property
and Improvements”). In connection with the sale, the Company reported a gain on sale of the property of $9,188,968 (GAAP
Basis) for the year ended December 31, 2016. There was a Tax Basis gain of approximate $9,051,430. The difference between the
GAPP Basis and Tax Basis gain was mainly attributable to depreciation. The gain was offset by Net Operation Losses the Company
has generated in prior periods, so no income tax was recorded, but an estimated Alternative Minimum Tax liability of $181,089
was recorded. Offsetting the Alternative Minimum tax recorded is a Deferred Tax Asset of the same amount related to the Alternative
Minimum Tax Liability (Alternative Minimum Tax Credit Carryforward). Management believes that it is more likely than not
that the Company will utilize the Alternative Minimum Tax Carryforward in future periods, as of the December 31, 2016 reporting
period.

F-40

At December 31, 2016, the Company has available
for federal income tax purposes a net operating loss carry forward of approximately $5,500,000 that may be used to offset future
taxable income. No income taxes were recorded on the earnings in 2016 and 2015 as a result
of the utilization of any carry forwards.

Deferred net tax asset consist of the following at December 31,
2016 and 2015:

2016

2015

Deferred tax asset

$

181,089

$

201,500

Less valuation allowance

0

(201,500

)

Net deferred tax asset

$

181,089

$

0

The provision for income taxes consists of the following:

2016

2015

Current tax (benefit)

$

$

Adjustment for prior year accrual

—

—

Net provision (benefit)

$

$

The provision for Federal taxes differs from
that computed by applying Federal statutory rates to the loss before any Federal income tax (benefit), as indicated in the following:

2016

2015

Federal statutory rate

35.0

%

35.0

%

State income taxes net of Federal benefit

3.6

%

3.6

%

38.6

%

38.6

%

The Company files income tax returns in the
U.S. Federal jurisdiction, and various state jurisdictions. The Company is no longer subject to U.S. Federal, state and local,
or non-U.S. income tax examinations by tax authorities for years before 2012.

The Company follows the provision of uncertain
tax positions as addressed in FASB Accounting Standards Codification 740-10-65-1. The Company recognized no increase in the liability
for unrecognized tax benefits. The Company has no tax position for which the ultimate deductibility is highly certain but for which
there is uncertainty about the timing of such deductibility. The Company recognizes interest accrued related to unrecognized tax
benefits in interest expense and penalties in operating expenses. No such interest or penalties were recognized during the periods
presented. The Company had no accruals for interest and penalties at December 31, 2016 and 2015.

NOTE 22 – SUBSEQUENT EVENTS

On
March 30, 2017, the Company issued an aggregate of 306,000 shares of our Common Stock to officers, employees and service providers
earned in 2016 but not issued, at an aggregate fair value of $301,800.

On
March 30, 2017, the Loan Agreement with C.T. Capital, Ltd., d/b/a C.T. Capital, LP, a Florida limited liability partnership
(the “Lender”), was amended to extend the Maturity Date to June 30, 2018 and provide for the understanding that
our Company shall not effect any conversion of this Loan and the Lender shall not have the right to convert any portion of the
Loan to the extent that after giving effect to the conversion, the Lender would beneficially own in excess of 9.99% of the number
of shares of our Company’s shares of Common Stock outstanding immediately after giving effect to the issuance of shares
of Common Stock issuable upon conversion of the Loan by the Lender.